Australia’s Trade Gap Unexpectedly Narrows on Exports

By Jacob Greber

Aug. 5 (Bloomberg) -- Australia’s trade deficit unexpectedly narrowed in June as exports including gold rose and imports stagnated.

The shortfall shrank to A$441 million ($372 million) from a revised A$737 million in May, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg survey of 19 economists was for a gap of A$800 million.

Reserve Bank Governor Glenn Stevens says a recovery in China that is helping stoke global demand for natural resources may help Australia’s economy grow faster than he forecast six months ago. Stevens left the benchmark interest rate unchanged at a half-century low of 3 percent for a fourth month yesterday and signaled the next move may be an increase.

“The improvement comes on the back of continued resilience in exports,” said Ben Dinte, an economist at Macquarie Group Ltd. in Sydney. “In a positive sign for domestic demand, imports of consumer goods” rose.

The Australian dollar rose to 84.43 U.S. cents at 12:12 p.m. in Sydney from 84.40 cents just before the report was released. The two-year government bond yield was unchanged at 4.45 percent.

Exports rose 2 percent to A$20.4 billion in June, today’s report showed. Shipments of gold jumped 17 percent and cereal exports surged 15 percent.

Imports were little changed at A$20.8 billion. Fuel imports rose 13 percent and consumer goods advanced 4 percent.

Recession Avoided

Australia avoided a recession in the first quarter as government cash handouts and interest-rate cuts stoked consumer spending. A report yesterday showed retail sales jumped 2 percent in the second quarter from the previous three months.

The economy expanded 0.4 percent from the fourth quarter, when it shrank 0.6 percent. Second-quarter figures will be published on Sept. 2.

BHP Billiton Ltd., the world’s largest mining company, said today that China’s iron ore imports are increasing as steel production recovers “rapidly.”

The price of iron ore for immediate delivery to China, the biggest buyers of the steelmaking material, is now 25 percent above the benchmark agreed this year between Australian producers and mills in Japan, Korea and Taiwan, Ian Ashby, BHP iron ore division president, said in Kalgoorlie, Western Australia.

Roubini’s View

Nouriel Roubini, the New York University economist who predicted the global financial crisis, said this week in Western Australia that commodity prices will rise, especially next year.

“There is now potentially light at the end of the tunnel,” Roubini said on Aug. 3.

Economic growth in China accelerated in the second quarter to 7.9 percent from a year earlier.

Governor Stevens signaled yesterday that the next move in interest rates may be an increase as the economy gathers momentum.

Australia’s economy “is stronger than expected a few months ago,” he said, adding that growth in China “has been very strong.”

Investors predict Australia’s benchmark overnight cash rate target will be 155 basis points higher in a year, a Credit Suisse Group AG index based on swaps trading showed at 12:12 p.m. in Sydney.

“Australia’s economy remains quite resilient,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. Still, trade “numbers over the next few months are going to be quite volatile,” as changes in commodity prices feed through.

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