Exports to China hit new highs

International Trade

• Trade swings back into deficit: Australia’s trade accounts moved back into the red in April, recording a deficit of $122 million. But the March trade surplus was revised up from $731 million to $902 million with the February surplus revised up from $1,257 million to $1,729 million.
• Exports to China soar: Over the past year exports to China hit a record $101.4 billion, up 31.9 per cent over the year and accounting for a record 36.9 per cent of Australia’s total exports.
• Australia’s rolling annual trade surplus with China rose from $50.9 billion to a record $51.9 billion in March, translating to over $2,200 for every Australian person.

What does it all mean?

• There may be some disappointment that Australia recorded a trade deficit in April. But the blues would have been quickly washed away with the upward revision to surpluses for February and March. And Easter does play havoc with seasonal adjustment – especially when Easter falls near ANZAC Day, causing people to take elongated holiday breaks. In trend terms, the trade accounts remain solidly in the black.
• One reason that Australia recorded a trade deficit in April was a surge in imports of phones (“telecommunication equipment”). Australia is now importing a record $8.4 billion of phones (presumably largely mobile phones), ahead of imports of toys & sporting goods and household electrical goods. Being connected is clearly important for the average Aussie.
• Australia’s exports to China hit fresh record highs in April and there are no signs that the record-breaking run is coming to an end. Over the past year Australia exported just over $101 million goods and services to China while imports from China were only slightly below $50 million. China is dominating Australia’s trade like no country, apart from the UK which held sway many decades ago.

What do the figures show?

International trade:

• Australia’s trade accounts swung from a surplus of $902 million in March to a deficit of $122 million in April. The March trade surplus was revised up from $731 million to $902 millionwith the February surplus revised up from $1,257 million to $1,729 million.
• In April, exports of goods and services fell by 1.5 per cent (goods fell by 1.8 per cent) while imports of goods and services rose by 2.2 per cent (goods up 2.3 per cent). It was the best gain in imports in four months. Exports are up 11.4 per cent on a year ago, while imports are up by 6.6 per cent.
• Rural exports fell by 5.9 per cent in April while non-rural exports fell by 0.5 per cent.
• The main components contributing to the fall in exports were: “other” rural exports, down $146 million or 9 per cent; and coal, coke and briquettes, down $361 million or 10 per cent. Offsetting the falls was metal ores and minerals component, up $254 million or 3 per cent.
• Within imports, consumer imports rose by 2.8 per cent in April with capital goods imports up 8.1 per cent while intermediate goods imports fell by 0.8 per cent.
• Consumer goods imports are up 15.7 per cent on a year ago while capital goods imports are down by 7.4 per cent and intermediate goods imports are up by 13.3 per cent.
• The net services deficit widened by $79 million to $1,026 million in April.
• Australia’s exports to China hit a record $101.4 billion in the year to April, up 31.9 per cent over the year and accounting for a record 36.9 per cent of Australia’s total exports. The share of exports going to Japan and the US remained at or near record lows. In the month of April, Australia shipped goods totalling $9,148 million to China.
• Australia’s imports from China hit a record $49.5 billion in the year to April, up 11.0 per cent on a year ago and accounting for 19.8 per cent of Australia’s total imports.
• Australia’s rolling annual trade surplus with China rose from $50.9 billion to a record $51.9 billion in April, translating to over $2,200 for every Australian person.
• The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.
• China has a stranglehold on two-way trade with Australia. In short, if China sneezes then Australia will catch cold. So the fact that the Chinese economy is struggling to maintain momentum at present bears watching. In May the HSBC gauge of services sector activity in China eased from 51.4 to 50.7, just above the 50 line that divides expansion from contraction.

What is the importance of the economic data?

• The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.

What are the implications for interest rates and investors?

• China has a stranglehold on two-way trade with Australia. In short, if China sneezes then Australia will catch cold. So the fact that the Chinese economy is struggling to maintain momentum at present bears watching. In May the HSBC gauge of services sector activity in China eased from 51.4 to 50.7, just above the 50 line that divides expansion from contraction.