By Jacob Greber
Dec. 2 (Bloomberg) -- Australia’s current account deficit narrowed for a second straight quarter in the three months through September as exports of coal and iron ore rose.
The shortfall on goods, services and investment shrank to A$9.74 billion ($6.2 billion) from a revised A$14 billion in the second quarter, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg News survey of 21 economists was for an A$11.1 billion gap.
Demand from China for coal and iron ore helped boost export income and stoke profits at miners including BHP Billiton Ltd. The current account gap may narrow further as consumers spend less on imported goods such as cars. The central bank will probably cut its benchmark lending rate to a six-year low of 4.5 percent from 5.25 percent at 2:30 p.m. in Melbourne today, economists forecast.
“The tail end of the commodity boom has been favorable to the trade picture,” said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney. “That has now turned against us because of fall in commodity prices.”
The Reuters/Jefferies CRB futures index for prices of 19 raw materials has fallen 51 percent since hitting a record on July 2.
Australia’s trade surplus widened in September as exports of coal and iron ore surged, a report showed on Nov. 5.
Net Exports
The Australian dollar rose to 63.69 U.S. cents at noon in Sydney from 63.48 cents before the report was released. The two- year government bond yield was unchanged at 2.99 percent.
The current account is the broadest measure of trade because it includes investment flows as well as goods and services shipments. A deficit represents money Australia has to borrow overseas to pay for the goods and services it imports, and to finance investment not covered by local savings.
Net exports subtracted 0.4 percentage points from economic growth in the third quarter, today’s report showed.
Rio Tinto Group and BHP negotiated price increases this year of as much as 97 percent for iron ore destined for China, helping an economic expansion that’s being eroded by slower household spending, which accounts for about 60 percent of gross domestic product.
Miners’ Profits
A report published yesterday showed business profits rose in the three months through September for a fourth quarter, led by a 19 percent jump in earnings at mining companies.
The government will publish a report tomorrow showing third-quarter gross domestic product probably rose 0.2 percent from the previous quarter, when it grew 0.3 percent, according to the median estimate in a Bloomberg survey of economists.
Central bank Governor Glenn Stevens will cut the benchmark interest rate today for the fourth time in as many months to fuel household spending, according to all 21 economists surveyed by Bloomberg.
Sales of new cars slumped 10.6 percent in the 12 months through October, the biggest annual decline in more than seven years, the government reported on Nov. 19.
A separate report published today shows retail sales rose 0.2 percent in October, taking this year’s monthly average gain to 0.1 percent. Last year, retail sales rose by an average of 0.6 percent.
‘Outlook Weak’
Weaker consumer demand is also hurting earnings at retailers such as David Jones Ltd. Australia’s second-biggest department store chain said last week that sales in the three months ended Oct. 25 fell 6.3 percent.
Chief Executive Officer Mark McInnes said the outlook for the rest of fiscal 2009 is worse than that experienced by the company in the last recession of 1990 to 1991.
The net income deficit narrowed to A$11.1 billion in the third quarter from A$12.7 billion in the previous three months, today’s report showed.
The goods and services trade balance swung to a surplus of A$1.43 billion from a deficit of A$1.26 billion.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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