Australias Trade Gap Narrows on Beef, Coal Exportsadmin
Australia’s trade deficit narrowed in November on increased beef and coal shipments, signaling exports may drive growth in the Asia-Pacific region’s fifth- largest economy.
The trade shortfall narrowed to A$843 million ($657 million) from A$1.51 billion in October, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg News survey of 19 economists was A$775 million. Overseas shipments rose 1 percent, the third straight gain, and imports dropped 3 percent.
Exports began to stoke growth toward the end of 2006, and that may continue as mining and energy producers increase production to meet soaring Chinese demand for commodities. Rising shipments may counter the effect of higher interest rates and slower business investment as the nation’s economic expansion enters its 16th year.
“The long-awaited improvement in our external position is starting to come through,” said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney. “This is important because many in the market are expecting exports will be one of the key drivers of growth over the next year.”
The Australian dollar traded at 78.03 U.S. cents at 4:43 p.m. in Sydney from 78.01 cents immediately before the report was released. The yield on the benchmark 10-year bond fell 1 basis point, or 0.01 percentage point, to 5.86 percent.
Net exports, which measure the change in exports minus the change in imports, made the first positive contribution to Australia’s economic expansion in more than four years in the third quarter of 2006. The economy expanded 0.3 percent from the previous three months, the slowest in three years.
Total exports climbed to A$18.03 billion in November, the report showed. The worst drought in a century cut grain exports by 7 percent, countered by a 4 percent gain in meat shipments.
“Demand for Australian beef is extremely strong,” said Richard Rains, chief executive officer of Sanger Australia Pty, which exports A$350 million of beef each year, 90 percent of it to Japan, the U.S. and Korea.
“There are a lot of cattle being slaughtered in Australia because of the drought, so we can keep up with the solid demand at the moment,” he said in Sydney.
Benchmark cattle prices in Australia plunged 25 percent last year as drought forced ranchers to flood sale yards with animals they couldn’t feed. Meantime, exports to South Korea and Japan soared amid bans on supplies from U.S. beef on mad cow disease concerns.
Total farm exports rose 2 percent. Manufacturing shipments, such as medicines and scientific equipment, climbed 13 percent. Shipments of non-rural goods, which include minerals, increased just 0.3 percent. Coal exports climbed 5 percent.
Surging investment by miners and energy producers has yet to translate into a pickup in commodity exports, said David de Garis, senior markets economist at National Australia Bank Ltd.
“There is still a mixed performance from exports,” he said. “We’re yet to see a rotation into increased export volumes. We should be starting to see that.”
Mining investment climbed at an annual rate of more than 80 percent in the first half of last year before slowing to 27 percent growth in the third quarter.
Companies were responding to rising commodity prices, which soared 11 percent in December from a year earlier, led by a 58 percent jump in base metal prices, according to an index compiled by the Reserve Bank.
“We’ve seen the price boom in commodities and the response in terms of investment, and now volumes should start to really accelerate,” said Warren Hogan, head of market economics and strategy at Australia & New Zealand Banking Group Ltd. in Sydney.
Rio Tinto Group, the world’s second-largest iron ore exporter, has a $4 billion program to boost production and exports of iron ore, including exploration, mine expansion and port upgrades.
Supplies will likely continue to lag behind demand growth in 2007, Sam Walsh, head of Rio Tinto’s iron ore business, said in November. He predicted iron-ore prices would climb in 2007 for a fifth straight year, after rising 19 percent last year.
“When the market is tight, and when demand exceeds supply, one would expect prices to increase,” he said.
A pickup in commodity export volumes typically lags the start of a price boom by about five years, Treasury official David Gruen said last year. He predicted faster growth in resources shipments during 2007.
Exports to China in the five months ended Nov. 30 rose 28 percent from a year earlier, today’s report showed. Exports to Japan gained 11 percent.
Imports fell to A$18.87 billion from October as fuel imports declined and companies bought less machinery and equipment once expansion projects finished.
Imports of capital goods, which include business machinery and vehicles, dropped 3 percent. Imports of intermediate goods, which include fuel, fell 6 percent. Imports of consumer goods were little changed.
Australia’s trade balance has been in deficit since April 2002, peaking at a shortfall of A$2.5 billion in November 2004.