Australia’s foreign trade position had a weak start to the year, but economists believe it will rebound on solid coal and iron prices and a boost in liquefied natural gas exports.
The trade surplus fell to $1.3 billion in January, from December’s $3.3 billion, as exports slipped three per cent and imports rose four per cent.
National Australia Bank economics director David de Garis said the drop in exports was driven by a $671 million, or 39 per cent, slump in gold exports.
He said that was mainly related to flooding affecting output at Newcrest’s Mining’s Telfer gold mine in Western Australia.
Weather could also explain a seven per cent, or $406 million, fall in coal exports, Mr de Garis said, and a drop of two per cent, or $151 million, in metal ore and mineral exports.
“With Telfer hit by bad weather, it’s conceivable that weather could have also adversely affected iron ore in January,” he said.
“That’s quite usual at this time of the year when northern monsoons often interrupt activity.”
National Australia Bank chief markets economist Ivan Colhoun said imports were strong across the board, including a seven per cent, or $543 million, jump in consumption goods, and consumer electronics in particular.
“You can look at that and say that’s bad, or you can look at that as showing domestic demand is rising,” Mr Colhoun said.
JP Morgan economist Tom Kennedy said the decline in Australia’s foreign trade position looks overdone.
Coal and iron ore prices and liquefied natural gas exports would help turn things around in coming months, he said.
“Iron ore prices continue to run well ahead of both JP Morgan and consensus expectations, while coal contract prices for the first quarter are still elevated,” Mr Kennedy said.
“Supporting these nominal drivers is the looming supply expansion in LNG which we expect will become more prominent in the trade release as we progress through 2017.”