Trade deficit figures released on Thursday are the worst numbers since data collection began in 1971. According to data released by the Australia Bureau of Statistics, the monthly trade deficit in April came to $3.90bn. “Australia's April trade data was a disaster," said JP Morgan analyst Tom Kennedy. "The largest deficit ever recorded, on a data series that dates back to 1971.” Projections from the same US-bank pegged the trade deficit to come in at $2.1bn. The country posted a trade deficit of $1.2bn in the previous month.
The poor trade deficit data was partially attributed to the headwinds facing Australia’s mining sector. Economists are now concerned that the ballooning trade deficit will impact gross domestic product. “The higher trade deficit has implications for the GDP, which included a larger than expected net export but today's trade numbers raise questions about how quickly we appear to have reversed," said Westpac’s chief currency strategist Robert Rennie. "It appears quarter two has got off on a very poor footing.”
Imports rose by 4 per cent, mainly impacted by the 69 per cent rise in the value of machinery and industrial equipment. Exports of coal were inhibited by severe weather conditions, falling 22 per cent. Plummeting commodity prices such as iron ore only fuelled the deficit further. The mining sub-category, primarily influenced by iron ore, fell 13 per cent. The value of overall exports fell 6 per cent in April. Despite the weak data, Mr. Kennedy said that some of the data was seasonal or circumstantial. “Volumes are expected to pick-up strongly from here, given ports data and the output schedules of the miners," he said. "Similarly, iron ore prices have bounced 30 per cent from the April's lows in spot markets, meaning prices dynamics will become more favourable for iron ore exporters in coming months."
Author: Imran Valibhoy
Jun 04, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.