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By Jacob Greber
May 6 (Bloomberg) -- Australia's trade deficit narrowed in March as iron ore, coal and wheat exports jumped, stoking an economic expansion in its 17th year.
The trade shortfall shrank to A$2.74 billion ($2.59 billion) from a record A$3.26 billion in February, the Bureau of Statistics said in Sydney today. The median estimate of 25 economists surveyed by Bloomberg was for a A$2.9 billion gap.
Rising exports will bolster Australia's $1 trillion economy, which expanded at the slowest pace in a year in the fourth quarter because of a drop in resource shipments. Wheat production may almost double from a year earlier amid surging prices and higher rainfall, a report forecast today. The government also predicts overseas sales of raw materials will increase by the most in three decades over the coming 12 months, driven by demand from China.
``We expect a sustained improvement in the trade balance as the year unfolds,'' said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney. ``Export growth should strengthen,'' and import growth should slow amid ``further likely moderation in domestic demand'' because of higher interest rates.
``We anticipate much smaller trade deficits going forward and even possibly surpluses,'' Ong said. ``This would go some way to supporting overall growth.''
The Australian dollar fell to 94.42 U.S. cents at 4:43 p.m. in Sydney from 94.64 cents before the figures were released. The yield on the two-year government bond dropped 5 basis points, or 0.05 percentage point, to 6.52 percent.
Exports rose 4 percent to A$19.2 billion in March from February, today's report showed. Iron ore shipments jumped 30 percent and coal rose 31 percent. Wheat increased 12 percent and meat surged 8 percent.
Monthly Deficit
The monthly trade balance, which has been in deficit since March 2002, widened in the three previous months as exporters battled bottlenecks at mines and congestion at ports and railways. Crop production has been cut by the worst drought in a century in the southern parts of the nation.
Economic growth slowed to 0.6 percent in the fourth quarter as transport constraints reduced exports from Australia, the world's largest shipper of coal, iron ore and wool. Overseas shipments account for about 20 percent of gross domestic product.
Floods in the northeast of the country have also constrained shipments of natural resources. BHP Billiton Ltd., the world's biggest mining company, said on Feb. 25 that heavy rainfall in Queensland may cut its share of coal output from two ventures by as much as 15 percent of last year's total.
`Welcome Improvement'
Today's report is a ``welcome improvement in exports,'' said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney. ``We will soon start to see the effects of gargantuan rises in coal and iron ore prices coming through.''
BHP and Rio Tinto Ltd., the world's third largest mining company, may negotiate a price increase of up to 85 percent for iron ore destined for China, the Australian Financial Review reported today, citing senior figures in the industry.
Resource-export sales may surge 30 percent to a record A$189.1 billion in the year ending June 30, 2009, the Canberra- based Australian Bureau of Agricultural and Resource Economics said on March 4.
Prices for Australia's top five commodity exports -- iron ore, coking coal, thermal coal, gold and crude oil -- have risen to records this year.
Wheat Production
A separate report published today by National Australia Bank forecast wheat production will almost double from a year earlier to 25.1 million metric tons, as weather conditions improve in Western Australia state and northern New South Wales.
Total imports rose 1 percent to A$21.9 billion in March, today's report showed.
The highest borrowing costs in almost 12 years are leaving households with less money to spend on imported goods, and forcing companies to cut purchases of foreign-made machinery.
The central bank left its benchmark interest rate unchanged at 7.25 percent today for a second month, saying there is mounting evidence the economy will slow this year after increasing borrowing costs in March and February.
Imports of household electronics fell 7 percent and clothing declined 3 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
May 6 (Bloomberg) -- Australia's trade deficit narrowed in March as iron ore, coal and wheat exports jumped, stoking an economic expansion in its 17th year.
The trade shortfall shrank to A$2.74 billion ($2.59 billion) from a record A$3.26 billion in February, the Bureau of Statistics said in Sydney today. The median estimate of 25 economists surveyed by Bloomberg was for a A$2.9 billion gap.
Rising exports will bolster Australia's $1 trillion economy, which expanded at the slowest pace in a year in the fourth quarter because of a drop in resource shipments. Wheat production may almost double from a year earlier amid surging prices and higher rainfall, a report forecast today. The government also predicts overseas sales of raw materials will increase by the most in three decades over the coming 12 months, driven by demand from China.
``We expect a sustained improvement in the trade balance as the year unfolds,'' said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney. ``Export growth should strengthen,'' and import growth should slow amid ``further likely moderation in domestic demand'' because of higher interest rates.
``We anticipate much smaller trade deficits going forward and even possibly surpluses,'' Ong said. ``This would go some way to supporting overall growth.''
The Australian dollar fell to 94.42 U.S. cents at 4:43 p.m. in Sydney from 94.64 cents before the figures were released. The yield on the two-year government bond dropped 5 basis points, or 0.05 percentage point, to 6.52 percent.
Exports rose 4 percent to A$19.2 billion in March from February, today's report showed. Iron ore shipments jumped 30 percent and coal rose 31 percent. Wheat increased 12 percent and meat surged 8 percent.
Monthly Deficit
The monthly trade balance, which has been in deficit since March 2002, widened in the three previous months as exporters battled bottlenecks at mines and congestion at ports and railways. Crop production has been cut by the worst drought in a century in the southern parts of the nation.
Economic growth slowed to 0.6 percent in the fourth quarter as transport constraints reduced exports from Australia, the world's largest shipper of coal, iron ore and wool. Overseas shipments account for about 20 percent of gross domestic product.
Floods in the northeast of the country have also constrained shipments of natural resources. BHP Billiton Ltd., the world's biggest mining company, said on Feb. 25 that heavy rainfall in Queensland may cut its share of coal output from two ventures by as much as 15 percent of last year's total.
`Welcome Improvement'
Today's report is a ``welcome improvement in exports,'' said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney. ``We will soon start to see the effects of gargantuan rises in coal and iron ore prices coming through.''
BHP and Rio Tinto Ltd., the world's third largest mining company, may negotiate a price increase of up to 85 percent for iron ore destined for China, the Australian Financial Review reported today, citing senior figures in the industry.
Resource-export sales may surge 30 percent to a record A$189.1 billion in the year ending June 30, 2009, the Canberra- based Australian Bureau of Agricultural and Resource Economics said on March 4.
Prices for Australia's top five commodity exports -- iron ore, coking coal, thermal coal, gold and crude oil -- have risen to records this year.
Wheat Production
A separate report published today by National Australia Bank forecast wheat production will almost double from a year earlier to 25.1 million metric tons, as weather conditions improve in Western Australia state and northern New South Wales.
Total imports rose 1 percent to A$21.9 billion in March, today's report showed.
The highest borrowing costs in almost 12 years are leaving households with less money to spend on imported goods, and forcing companies to cut purchases of foreign-made machinery.
The central bank left its benchmark interest rate unchanged at 7.25 percent today for a second month, saying there is mounting evidence the economy will slow this year after increasing borrowing costs in March and February.
Imports of household electronics fell 7 percent and clothing declined 3 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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