Biggest jump in rural exports in 25 years
Record US exports; WA exports hit record high
Foreign trade: The trade surplus rose by $1.77 billion to $6.785 billion in December (consensus: $8.75 billion surplus). Australia has posted 36 successive monthly trade surpluses. Exports lifted 2.8 per cent in December with imports down 2.4 per cent. Rural exports rose 18.4 per cent – the biggest lift in 25 years. Net exports are expected to detract around 0.2 percentage points from December quarter economic growth or GDP.
US & China exports: Australia exported a record $19.15 billion of goods to the US in the year to December and imported $34.40 billion. Australia’s rolling annual trade deficit with the US hit a 5-year low of $15.25 billion. Exports to China are down 2.1 per cent on a year ago – the biggest annual fall in 4½ years.
Western Australian exports: The rolling annual value of Western Australian exports rose by 2.9 per in December to a record high $186.387 billion.
Wine exports: Yesterday Wine Australia reported that the value of Australian wine exports fell by 1.0 per cent to $2.89 billion in December from a year ago. But the value of exports to Europe surged 22.0 per cent to a decade high of $704 million. And there was a 0.5 per cent lift in export volumes to 747 million litres, driven by a 19 per cent lift in UK volumes to 266 million litres – the biggest destination by volumes.
The trade data is instructive on income flows in the economy and consumer and business activity and has implications for the currency.
What does it all mean?
• Aussie farmers endured a torrid 2020. Trade tensions with China escalated following the drought, with tariffs, duties and anti-dumping measures imposed on a range of agricultural goods. But in a positive end to a difficult year, rural exports surged by a massive 18.4 per cent in December – the most in 25 years (since December 1995). Widespread rainfall boosted rural goods shipments with the value of cereal exports soaring by a whopping 75 per cent to $1.145 billion in December. In original terms, cereal and cereal preparations exports hit a record high $1.192 billion in the month.
• The value of metal ores and mineral exports rose 3.2 per cent in December with iron ore and concentrates exports hitting an all-time high of $12.57 billion. In rolling annual terms, iron ore exports surged by 20.4 per cent to $115.77 billion in December. Iron ore export earnings have soared on strong demand from China (as well as weak ore supply from Brazil) – triggering a surge in iron ore prices to 9-year highs in late 2020.
• Of course, the world’s biggest iron ore producer, Western Australia, has been the prime beneficiary. In fact, the rolling annual value of Western Australian exports rose by 2.9 per in December to a record high $186.387 billion.
• But it wasn’t all good news on the trade front. Despite posting a 36th successive monthly trade surplus, Australia’s exports to China fell by 2.1 per cent in December when compared with a year ago – the biggest annual decline in 4½ years – as political tensions intensified. That said, Aussie imports from China hit a record high in December. And Australia exported a record $19.15 billion of goods to our largest political ally – the US – in the year to December.
• Imports fell by 2.4 per cent in December after the easing of Covid-19 restrictions – especially in Victoria – led to a 9.3 per cent jump in goods imported in November. Capital goods exports dropped 16.1 per cent – the most in eight years (since December 2012).
What do you need to know?
International trade – December
• The trade surplus rose by $1.77 billion to $6.785 billion in December. Australia has posted 36 successive monthly trade surpluses.
• The rolling annual surplus lifted from $71.241 billion in the year to November to $72.675 billion in the year to December.
• Exports of goods and services rose by 2.8 per cent (exports of goods rose by 3.5 per cent).
• Imports of goods and services fell by 2.4 per cent (goods imports fell by 2.9 per cent).
• Rural exports surged 18.4 per cent – the biggest lift in 25 years. Exports of non-rural goods rose by 2.2 per cent. Gold exports fell by 2.7 per cent after soaring 44.7 per cent in November.
• Within imports, consumer imports rose by 2.5 per cent; capital goods imports fell by 16.1 per cent (the biggest drop in eight years) and intermediate goods imports lifted 2.2 per cent.
• Services exports fell 1.7 per cent in December with services imports up 0.5 per cent. A net services surplus of $1.211 billion was posted in December, down from a $1.322 billion surplus in November.
• Australia’s annual exports to China edged higher from $145.14 billion in November to $145.19 billion in December. Exports to China are down 2.1 per cent on a year ago – the biggest annual decline in 4½ years.
• Australia’s annual imports from China lifted from $82.89 billion in November to a record $84.44 billion in December. Annual imports were up 6.5 per cent on a year ago.
• Australia’s rolling annual trade surplus with China fell from $62.25 billion in November to a 17-month low of $60.75 billion in December.
• Australia exported a record $19.15 billion of goods to the US in the year to December and imported $34.40 billion. Australia’s rolling annual trade deficit with the US hit a 5-year low of $15.25 billion.
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 investors?
• While political tensions between Australia and China linger, some Aussie producers are looking at alternative export markets to generate income. In fact, Wine Australia reported that the value of Australian wine exports to Europe surged 22 per cent in December to a decade high of $704 million. And there was a 0.5 per cent lift in Aussie wine export volumes to 747 million litres, driven by a 19 per cent lift in UK volumes to 266 million litres – the biggest destination by volume.
• Following the release of the trade data today, Commonwealth Bank (CBA) Group economists expect that net exports detracted around 0.2 percentage points from December quarter GDP. At this early stage we are tipping 2.6 per cent growth in the Australian economy in the December quarter. The current account surplus is estimated to be $A13.3 billion (or 2.7 per cent of GDP).
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Published by Ryan Felsman, Senior Economist, CommSec