Australian trade balance drives surge in current account surplus in Q2, trade balance to remain strong

Australian current account came in surplus in the second quarter, surpassing market expectations. The surplus was a rebound from the revised AUD 1.1 billion deficit seen in the first quarter. The trade balance rose to AUD 19.9 billion from AUD 14.8 billion. This was the main driver for the surplus. The fall in income deficit added to the size of the surplus by falling from AUD 15.5 billion to AUD 13.9 billion in the second quarter.

The volume of export rose 1.4 percent quarter-on-quarter led by a 2.4 percent rise in resources. Coal was the main driver of resource exports, rising 3.7 percent quarter-on-quarter while iron ore exports rose just 0.6 percent. In the meantime, rural goods dropped 4.3 percent, with softness seen throughout most rural categories. Non-monetary gold dropped 12 percent in the second quarter after the 39.2 percent rise in the first quarter.

Import volumes dropped 1.3 percent reflecting declines throughout most categories. The biggest fall was from consumption goods, which dropped 2.9 percent. The fall in consumption goods was mainly due to household electrical items falling 6.1 percent and car imports falling 10.6 percent for the quarter.

The terms of trade was up 1.5 percent quarter-on-quarter, reflecting a huge rise in export prices and a rise in import prices.

“We anticipate further solid trade surpluses going forward, but Q3 looks likely to be a little lower given the fall in commodity prices. The net exports contribution to GDP growth was also stronger than the market expected. Given the weakness seen in other parts of the economy, continued strength in trade will be important for GDP going forward”, said ANZ in a research report.