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Aussie trade deficit widens to A$2.98b

Oct shortfall due to soaring Aussie $, port congestion dampening exports

(SYDNEY) Australia’s trade deficit unexpectedly widened in October as a surge in the nation’s currency and bottlenecks at ports disrupted exports of minerals and coal.

The shortfall expanded to A$2.98 billion (S$3.82 billion) from a revised A$1.92 billion in September, the Bureau of Statistics said in Sydney yesterday. The median estimate of 25 economists surveyed by Bloomberg News was for a A$1.8 billion gap. Exports dropped 3 per cent and imports rose 2 per cent.

Australia has reported a trade deficit every month for five years as exporters such as Rio Tinto Group struggle to overcome congestion at mines, ports and railways, and as drought curbs farm production. The government cut its wheat-harvest forecast in October for the third time this year, suggesting exports may decline further.

‘It’s very disappointing to see the extreme weakness in non- rural commodities’ such as metal ore exports, said Kieran Davies, an economist at ABN Amro Australia Ltd in Sydney. ‘Some weakness had been anticipated given the strength of the Australian dollar, but this seems to be as much about weaker volumes.’

The government will publish its third-quarter gross domestic product report tomorrow. The median estimate in a Bloomberg News survey of economists is for 1 per cent growth in the three months through September from the previous quarter, when the economy expanded 0.9 per cent.

Total exports fell to A$17.24 billion in October, yesterday’s report showed. Overseas sales account for 20 per cent of the economy. Farm shipments, such as meat, sugar and wool, slumped 5 per cent and exports of non-rural goods, which include minerals and ores, slid 7 per cent.

‘We seem to be suffering from more disruptions to exports,’ said Brian Redican, senior economist at Macquarie Bank Ltd in Sydney. ‘Net exports may hold back fourth-quarter growth,’ he added.

Australia’s government cut its estimate for exports of minerals and energy in September because of transport delays. Shipments of commodities are expected to be A$112.2 billion in 2007-08, down from the A$117.5 billion forecast in June.

BHP Billiton Ltd, the world’s biggest mining company, reported production growth that missed some analysts’ forecasts in October, a sign that capacity constraints and maintenance requirements will make it harder to meet surging demand.

‘Sooner or later, the considerable investment in resources over the last five years will turn up as increased exports,’ said John Edwards, HSBC Bank Australia Ltd’s chief economist in Sydney.

Exports have also been hurt by the Australian dollar’s surge to a 23-year high against its US counterpart in October.

The local currency has climbed 12 per cent this year.

Australian company profits declined in the third quarter for the first time in more than two years, a separate report published yesterday by the Bureau of Statistics showed. That contrasts with imports, which have risen amid a jump in consumer spending. An economic expansion, a shortage of skilled workers, and rising employment have boosted households’ disposable income.

Total imports climbed to A$20.22 billion in October. Inbound shipments of gasoline and lubricants surged 16 per cent, and imports of consumer goods declined 1 per cent.


Source: Bloomberg (Business Times 4 Dec 07)

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