Australia’s Trade Surplus Widens on Exports of Gold

By Jacob Greber

April 2 (Bloomberg) -- Australia’s trade surplus unexpectedly widened in February as imports of consumer goods fell and exports of gold surged.

The trade surplus expanded to A$2.11 billion ($1.47 billion) from a revised A$926 million in January, the Bureau of Statistics said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg News was for A$700 million.

Global demand for resources such as gold, sought by investors seeking to protect their wealth amid a deepening recession, may cushion Australia’s economy even as consumers and businesses cut spending. Central bank Deputy Governor Ric Battellino said this week Australia will remain one of the better-performing economies in the developed world.

“Australian exports steadied in February, after some big falls in the previous few months,” said John Edwards, chief economist at HSBC Bank Australia Ltd. in Sydney.

“Today’s trade numbers will be warmly welcomed” by the central bank, and support the view that policy makers will keep borrowing costs unchanged next week for a second month, Edwards added.

The Australian dollar rose to 70.10 U.S. cents at 12:41 p.m. in Sydney from 69.78 cents just before the report was released. The two-year government bond yield fell 2 basis points to 2.79 percent. A basis point is 0.01 percentage point.

Stocks Rise

The benchmark S&P/ASX stock index rose 2.7 percent, paced by shares of mining companies such as Newcrest Mining Ltd., the nation’s largest gold producer, which jumped 3.5 percent.

Exports rose 4 percent to A$24.9 billion in February, today’s report showed. Gold shipments jumped 55 percent, or by A$784 million. Imports fell 1 percent to A$22.8 billion, led by a 13 percent drop in consumer goods from aboard.

Gold rose to more than $1,000 an ounce in New York in February for the first time in almost a year as investors, spooked by plunging stocks and a global recession, boosted physical demand for the metal.

Gold held in ETF Securities Ltd.’s exchange traded funds rose to 7.32 million ounces, the Jersey, Channel Island’s-based company said on March 30. Zurich-based Zuercher Kantonalbank’s Gold ETF holdings rose to 4.36 million ounces as of March 27, from 4.22 million ounces a week earlier.

The rise in February gold shipments from Australia was almost entirely offset that month by gold imports of A$782 million, HSBC’s Edwards said. “Removing the gold transaction, exports were up about 1 percent and imports fell 4 percent.”

Iron Ore

There are signs demand for exports may slide in coming months.

Chinese steelmakers, the world’s largest buyers of iron ore, have asked suppliers to temporarily cut prices by 40 percent until an annual contract-price agreement is reached, the China Iron and Steel Association said March 30.

The Organization for Economic Cooperation and Development this week forecast the steepest economic contraction in more than 50 years across its member nations. The combined economy of the world’s most-industrialized countries will shrink 4.3 percent in 2009, it said March 31.

“There are limits on how much we can insulate ourselves from what is happening abroad, and therefore there are probably still some difficult times ahead,” the central bank’s Battellino said March 31.

Gross domestic product is “likely to fall in 2009,” he said. In February, the central bank tipped 0.5 percent growth.

Australia’s economy, the world’s biggest shipper of coal and iron ore, unexpectedly shrank 0.5 percent in the fourth quarter, the first contraction in eight years.

Job Losses

Miner BHP Billiton Ltd. is among companies firing workers and trimming investment plans as overseas orders for natural resources fall.

BHP Billiton said in January it will shed 3,400 workers in Australia as it shuts a nickel mine, closes part of a refinery and reduces coking coal output by as much as 15 percent.

Reports published last month show the unemployment rate rose to a four-year high of 5.2 percent in February as companies cut the largest number of full-time jobs in two decades.

Retail sales tumbled 2 percent in February, the biggest drop in almost nine years, as households spent less at department, furniture and clothing stores, a report showed yesterday.

To stoke economic growth, central bank Governor Glenn Stevens and his board lowered the overnight cash rate target by a record four percentage points to a 45-year low of 3.25 percent between September and February. They will cut the rate by at least another quarter point on April 7, according to 13 of 16 economists surveyed by Bloomberg News last week.

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