Australia’s Trade Surplus Widens to Record on Coal

By Jacob Greber

Dec. 4 (Bloomberg) -- Australia posted a record trade surplus in October, twice as large as economists forecast, as coal exports surged and import growth stagnated.

The trade surplus expanded to A$2.95 billion ($1.9 billion) from a revised A$1.25 billion in September, the Bureau of Statistics said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg News was for A$1.41 billion.

Increased shipments of raw materials have so far helped Australia’s A$1 trillion economy avoid it first recession since 1991, unlike the U.S., U.K., Europe and Japan. Central bank Governor Glenn Stevens cut borrowing costs this week by one percentage point to a six-year low of 4.25 percent as consumer spending stalled and the global slowdown deepened.

The jump in exports “was mainly owing to still-elevated prices for coal, rather than higher volumes,” said Helen Kevans, an economist a JPMorgan Chase & Co. in Sydney. “The downturn in global demand will weigh on exports going forward.”

The local currency’s 26 percent drop against the U.S. dollar this year increased returns from exports when companies converted their offshore earnings into local dollars.

The Australian dollar traded at 64.94 U.S. cents at 12:53 p.m. in Sydney from 64.81 cents before the report was released. The two-year government bond yield dropped 2 basis points, or 0.02 percentage point, to 3.04 percent.

Slowing Demand

“Part of the improving trade balance reflects softer imports and this appears to be what the market is focusing more on as it suggests slowing domestic demand,” said Anthony Thompson, senior economist at Westpac Banking Corp. in Sydney.

Import growth slowed to 0.3 percent in October from 7.1 percent in September. Consumer goods imports rose 1 percent and imports of capital equipment, including aircraft and machinery, fell 2 percent.

The domestic economy is showing further signs of cooling. Home-building approvals slumped 5.4 percent in October to the lowest since 2001, the statistics bureau also reported today.

Retail sales have gained an average of just 0.1 percent a month this year, according to government trend figures, down from 0.6 percent monthly growth last year.

Exports rose 7 percent to A$28.1 billion in October, today’s report showed. Coal shipments surged 20 percent.

The terms of trade, a measure of the nation’s export income, increased 21 percent in the three months through September, according to government figures released this week.

Australia’s economy advanced 1.9 percent in the third quarter from a year earlier. That compares with 0.7 percent growth in the U.S., 0.3 percent in the U.K. and 0.7 percent expansion in Europe.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net