Resurgent commodities lifted trade from a record deficit to a record surplus Australia’s basket of $A commodity prices has surged ~50% from a decade-low in Dec- 15 – led by the two largest exports, iron ore and coal. This has already seen a sharp turnaround from a record $4bn+ deficit in Dec-15, to a record $3½bn surplus in Dec- 16. In quarterly terms, trade switched from a 2.8% of GDP deficit in Q415 (the worst since Q108) to ~1% surplus in Q416, the best since the terms of trade peaked in 2011.
CAD already halved from a worrying 5½% of GDP in Q415, to 2¾% in Q316 At the same time, the net income deficit has narrowed from 2.8% of GDP in Q415 to 1½% in Q316. Hence, summing the trade & income deficits together, the current account deficit halved from a worrying 5½% of GDP in Q415 (the largest since 2009), to 2¾% in Q315, with a further narrowing to ~1% in Q416, the smallest since 1980.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
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.
