The Australian Bureau of Statistics (ABS) has just released trade data for the month of August, with Australia recording a big seasonally-adjusted increase in its trade deficit to -$2,027 million, from -$1,530 million in July. June and July’s trade balances were also revised down heavily, from -$227 million to -$791 million (June), and from -$556 million to -$1,530 million (July).
It was the eighth consecutive month that Australia has recorded a monthly trade deficit (see below chart).
In seasonally adjusted terms, exports fell $844m (3%) to $24,589m. The fall in exports was partly offset by a -$348m (-1%) fall in imports to $26,615m.
Australia’s major export – iron ore (23% share) – and third biggest export – gas (7% share) – were broadly flat over the month, whereas Australia’s second biggest export – coal (15% share) – fell by $210 million (see below chart).
Exports to China fell by -$214 million (-4%) over the month, taking its share of total exports to 28% from 29% in July. By contrast, exports to Japan rose by $124 million (+3%), taking its share of total exports to 22% from 21% in July.
Given their status as Australia’s major producers of iron ore (Western Australia) and coal (Queensland), Western Australia and Queensland continued to dominate the nation’s exports in August. Western Australia alone accounted for 47% of Australia’s merchandise exports in August, much of which was iron ore (see below chart).
Western Australia continues to hold-up Australia’s trade balance, recording a whopping (albeit lower) surplus of $6,735 million in August, again mostly on the back of iron ore exports (see below chart).
Finally, Australia’s services trade balance was flat over the month and has stabilised after a horror run since late-2008 on account of the high Australian dollar (see below charts).
Expect to see larger still trade deficits over coming months as exports to China contract and quarterly iron ore and coal price contracts are adjusted downwards.
Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
