Bloomberg News

Australia’s Record 2011 Trade Surplus Bolsters Currency: Economy

February 02, 2012

Feb. 2 (Bloomberg) -- Australia’s trade surplus soared to a record in 2011 on coal and iron ore shipments, sending the local currency to a five-month high.

Exports outpaced imports by A$19.3 billion ($20.7 billion) in the 12 months through Dec. 31, a Bureau of Statistics report showed in Sydney today. The December surplus unexpectedly widened to A$1.71 billion from a revised A$1.34 billion in November, compared with the median estimate of a A$1.2 billion surplus in a Bloomberg News survey of 21 economists.

The data underscore the Reserve Bank of Australia’s expectation that Chinese demand for the nation’s commodities will help propel the domestic economy even as a global expansion slows. Growth in Australia, which has avoided a recession for two decades, is driven by iron ore and coal shipments to Asia as the developing economies of China and India boost construction and power generation.

“The signals out of China are positive -- we’re still not seeing a slowdown in commodity demand,” said Ben Jarman, a Sydney-based economist at JPMorgan Chase & Co. who predicts the RBA will lower borrowing costs at next week’s meeting. For the central bank, “it’s going to be a close call. Numbers like this will tell them nothing disastrous yet has happened to the global economy.”

The Australian dollar increased to $1.0713 at 4:56 p.m. in Sydney, from $1.0710 before the data. It reached as high as $1.0757, the strongest level since Sept. 1. Traders trimmed bets on the chances of a quarter-percentage-point rate cut on Feb. 7 to 58 percent from 60 percent before the release.

Stocks Rise

Asian stocks rose for a third day on signs global manufacturing is strengthening.

The MSCI Asia Pacific Index advanced 1.2 percent as of 11:36 a.m. in Tokyo. Standard & Poor’s 500 Index futures added 0.2 percent and Treasury 10-year yields increased two basis points to 1.84 percent.

Today’s report showed Australia’s exports rose 2 percent to A$27.8 billion, the second-highest monthly total, led by a 31 percent jump in non-monetary gold shipments and an 8 percent gain in coal, coke and briquettes.

“The trade figures are very, very good,” Australian Trade Minister Craig Emerson said in an interview today with Bloomberg Television in Canberra. “It’s clear that this is being driven by Australia’s economic engagement with the Asia region in the Asian century.”

Consumer Demand

Elsewhere in Asia, Hong Kong retail sales probably slowed in December, gaining 20.5 percent from a year earlier, according to the median estimate in a Bloomberg survey before a report today.

Vietnam’s trade deficit narrowed to $100 million in January from $269 million in December, according to preliminary data released today by the General Statistics Office in Hanoi. Imports declined 18.7 percent from a year earlier while exports slipped 11.1 percent.

Switzerland reports trade data today, with the nation’s surplus narrowing to 2.5 billion Swiss francs in December from 2.95 billion a month earlier, economists predicted.

European producer-price inflation probably slowed to 4.3 percent in December from a year earlier, from 5.3 percent in November, a Bloomberg survey showed before a report today.

In the U.S., the number of people filing first-time claims for unemployment benefits probably fell to 371,000 in the week ended Jan. 28, from 377,000 in the previous week, a Bloomberg survey of 46 economists showed.

U.S. Unemployment

The U.S. tomorrow publishes nonfarm payrolls data for January that are forecast to show employment growth slowed to 145,000 in January from 200,000 a month earlier, according to the median of 81 estimates in a Bloomberg survey.

In Australia, more than two-thirds of exports go to Asia, with China accounting for 26 percent of merchandise shipments, while the European Union takes 8 percent and the U.S. less than 4 percent.

In minutes of its December rate decision the RBA said that “in China, most of the monthly indicators, including for industrial production and retail sales, were still consistent with solid” gross domestic product.

Chinese Premier Wen Jiabao, in a statement on the central government’s website yesterday, said the government will support small companies with a 15 billion-yuan ($2.4 billion) fund as growth moderates in the world’s second-largest economy.

Mining Bonanza

Australia’s exports and a A$456 billion pipeline of resource projects helped spur the local currency to $1.1081 on July 27, the highest level since it was freely floated in 1983.

Today’s trade report showed imports advanced 1 percent to A$26.1 billion on a 22 percent increase in fuel and lubricants, while imports of civil aircraft dropped 13 percent.

RBA Governor Glenn Stevens lowered the overnight cash rate target to 4.25 percent from 4.5 percent on Dec. 6, citing “considerable turbulence” in financial markets and an increased chance of a “further material slowing in global growth” as Europe’s sovereign debt crisis intensified.

A separate report in Australia today showed home-building approvals unexpectedly declined in December from the previous month for the third time in four months as weakness outside the resources industry hurt employment growth.

The so-called two-speed nature of Australia’s economy was reflected in the loss of 29,300 jobs in December, capping the worst year for employment since 1992.

Twenty-seven of 30 economists surveyed by Bloomberg News predicted this week Stevens would reduce borrowing costs for a third straight meeting to 4 percent.

“There is a degree of uncertainty around at the moment for a whole lot of reasons around what’s going on globally,” Richard Goyder, chief executive officer of Perth-based Wesfarmers Ltd., Australia’s second-largest retailer, told reporters on a conference call today. “Further interest rates reductions will obviously help.”

--With assistance from Daniel Petrie in Sydney and Rishaad Salamat in London. Editors: Brendan Murray, Nerys Avery

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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