ABS trade figures are out today and there’s no doubt about it, August was a cracking month, posting a big jump to record export revenues above $28 billion for the first time and delivering a surplus of $3.1 billion, the second highest ever. The good news came from one primary source, iron ore:
As you can see from the top chart, the last time we posted record exports, was at the 2008 cliff’s edge. There has already been some softeing in the ore price, and more in the swaps market (I’ll try to get a chart of that later). And backing that up, the LME steel price has also taken a beating since August, clearly busting its uptrend:
Nonetheless, combined with this morning’s building approvals, it’s been a good day for the economy.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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Just remember the composition of our exports (by value)
Iron ore – 24%
Coal – 17%
Gold – 6%
Natural gas – 5%
Petroleum oils – 4%
Wheat – 2.5%
Copper – 2.5%
Yes, that is 60% of our exports in just these commodities – and the latest price trends are not looking good.
As your graph shows H&H, it won’t take much of a movement in coal and iron ore prices to reverse this trend.
Downward moves in commodity prices will be cushioned to some extent by the fact that most contracts are expressed in $US. With the $A going down, export values in $A should hold up.
Of course, this also means that our imports get more expensive in $A …
Of course, Alex, that’s the automatic stabiliser at work. I still expect our exports to fall faster than the currency before this is over…
” I still expect our exports to fall faster than the currency before this is over…”
Me too.
ah yes
but with looming currency wars and China on the point of collapse – who’s to know if they will import anything at all
http://thepeakoilpoet.blogspot.com/2011/08/our-name-brand-is-australia.html
So just to be clear, this is a trade surplus – and that’s not the same as a current account surplus?
Correct. The trade account + capital account = current account.
Just quickly, the balance of trade is one sub-account of the current account. The other two reported by the ABS are the primary and secondary income accounts (flow investment returns and interest payments to foreign owners of assets/debt).
The capital account balances the current account and is a record sales of assets (financial or physical) between local and foreign owners.
While the trade balance is currently positive (we export more than we import) this has only been the case during the two recent terms of trade peaks.
The income accounts have been in deficit by $10-14billion per qrtr over the past 8 years, keeping the current account in deficit (despite the recent rade surpluses)
It takes a lot of trade suplus to catch up with that. And ironically, the trade suplus can feed into the income account deficit when profits from miners head to their foreign owners.
Thanks!
RBA has released commodity price index:
http://www.rba.gov.au/statistics/frequency/commodity-prices/2011/icp-0911.html
To the moon Alice….
Australia only deals in miracle commodities — iron ore and coal.
Pity the poor Saudis with all that useless oil they have. I mean, who needs oil? Just stick a hole in the ground anywhere and it comes gushing out.
Is it at all concerning that it bears no resemblance to the CRB index?