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Australia posts better than expected trade surplus, up 72 percent in December

Xinhua, February 2, 2017 Adjust font size:

Australia's trade surplus surged to a record high in December, according to figures released Thursday by the Australian Bureau of Statistics.

The trade surplus of 3.5 billion (Australian dollars) is the largest on record, only the second largest in the past three years, and comes after the record trade deficit of 4.4 billion (Australian dollars) a year ago.

Experts had speculated the economy had begun to shrink into a recession, but Thursday's strong figures in trade were enough to counteract other figures that showed a weakening in dwelling investment in Australia, with building approvals down 1.2 percent in December to 18 percent lower than their peak in June.

The rising surplus was driven by increased commodity prices, with a surge of 14 percent, or 705 million (Australian dollars) in coal exports to 5.8 billion (Australian dollars), while iron ore also shot up a further 10 percent for the period.

Paul Dales, chief economist at Capital Economics, told Xinhua, the lift in the Reserve Bank of Australia's commodity price index in January, means it is possible that the trade surplus may continue to increase over the next coming months.

However, Dales says these conditions may not last, citing two key factors that are set to have a detrimental impact on Australia's trade surplus later in the year.

"We are expecting the price of iron ore and coal to fall back, so that would reduce the size of the trade surplus later this year," Dales said.

Dales also had concerns of the strengthening of the Australian dollar playing a role in inhibiting Australia's trade growth.

"Over time, with a reasonable lag, changes in the dollar tend to reduce the volume of exports and increase the volume of imports, we do know that the Australian dollar strengthened fairly sharply last year, so there could be a drag from that as well coming through sometime over the next six months," Dales said.

The Australian dollar experienced its own boost on the back of the trade surplus figures, forging ahead to 76.42 U.S. cents at 1428 local time AEDT, from its Asian market open of 75.86 U.S. cents on Thursday. Endit