Australia’s exporters have put a weak end to 2017 behind them with a second consecutive solid monthly trade surplus for the year.
In seasonally adjusted figures, the surplus came in at $825 million in February — in line with market forecasts, but a slight narrowing from the downwardly revised $950 million surplus in January.
There was little net change between imports and exports with both rising 1 per cent over the month.
“The trade account is on track to be a small net contributor to growth this quarter after December quarter’s 0.5 per cent point detraction from real GDP,” NAB economist David de Garis said.
“Notwithstanding the pullback in iron ore prices over recent weeks, export commodity prices for the quarter past indicate a solid rise in the terms of trade, also assisting income growth.”
The stronger start to the year has largely been driven by a solid contribution of key commodity exports, particularly on the back of rising LNG and coal prices.
Iron ore and other minerals (+2.6 per cent) and coal (1.1 per cent) added an extra $290 million to the export side of the ledger, while wool exports (+25 per cent) were $76 million higher than January.
LNG slipped marginally with lower volumes outweighing higher prices, but the trend is one of continuing strength, with exports up 40 per cent over the year.
In the past 12 months a record $29 billion worth of LNG was shipped out, a six-fold increase on a decade ago.
Tourism and service exports also rose over the month, but manufacturers had a tougher month (-11 per cent).
Capital Economic Paul Dales said while the roughly neutral contribution to GDP by exports this quarter looked inconsequential, the sector could be a drag on growth if an escalation in the US-China trade spat resulted in China drawing back on trade with all countries.
“After all, Australia’s goods exports to China are worth 4.6 per cent of Australia’s GDP, which is a higher share than in other advanced economies,” Mr Dales said.
Australia is far more dependent on China for economic growth than other developed economies. (Source: Capital Economics)