Australia’s Trade Surplus Narrows as Exports Decline

By Jacob Greber

Jan. 8 (Bloomberg) -- Australia’s trade surplus narrowed in November by more than economists forecast as iron ore and coal exports fell and imports gained.

The surplus narrowed to A$1.45 billion ($1 billion) from A$2.96 billion in October, the Bureau of Statistics said in Sydney today. The median estimate of 14 economists surveyed by Bloomberg was for A$2.1 billion.

The weakening trade balance reinforces central bank Governor Glenn Stevens’s view that Australia’s economy will be hurt by waning global growth. Stevens and his board cut the benchmark interest rate last year by three percentage points to a six-year low of 4.25 percent in the most aggressive monetary policy easing since a recession in 1991.

“The trade balance may narrow in coming months as global economic growth slows,” said Alex Joiner, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne.

Exports fell 4 percent to A$26.9 billion in November, today’s report showed. Iron ore and mineral shipments dropped 13 percent and coal declined 2 percent.

The Australian dollar traded at 70.85 U.S. cents at 11:37 a.m. in Sydney from 71.03 cents before the report was released. The two-year bond yield was little changed at 2.98 percent.

Some economists including Tim Toohey, of Goldman Sachs Group Inc. in Sydney, expect waning global demand for commodities, especially from China for iron ore, will force businesses to pare investment and push Australia into a recession.

Confidence Drop

Business confidence fell to a record low in November and the jobless rate climbed to 4.4 percent, the highest in a year, from a three-decade low of 3.9 percent in February.

The central bank’s one percentage point interest-rate cut last month, the fourth reduction since early September, puts monetary policy at an “expansionary setting” to stoke business and consumer confidence, policy makers said on Dec. 16.

The rate cut had to be “large enough to have a noticeable effect on financing decisions of lenders and borrowers,” the Reserve Bank of Australia said in minutes of its Dec. 2 meeting.

Imports rose 2 percent in November. Consumer goods imports increased 6 percent.

Retail sales gained an average of just 0.1 percent a month in the first 11 months of 2008, according to government trend figures, down from 0.6 percent monthly growth in 2007.

The slide in consumer spending, which is hurting profits at retailers including Harvey Norman Holdings Ltd., was a key reason the government distributed A$8.9 billion at the start of last month to the elderly and families.

The Australian dollar has tumbled 28 percent since hitting a 25-year high of 98.49 U.S. cents on July 16, helping boost income from exports of raw materials.

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