A drop in exports and a weakening construction sector suggests the economy is still on shaky ground after collapsing into recession as a result of the coronavirus pandemic.
Exports fell sharply in July after being one of the rare bright spots during the economy’s record 7.0 per cent crash during the June quarter.
Australian Bureau of Statistics data on Thursday showed the international trade balance of goods and services surplus almost halved in July to $4.6 billion from $8.1 billion in June.
This was the result of a four per cent fall in exports in the month compared to a seven per cent surge in imports.
Commonwealth Securities senior economist Ryan Felsman questioned whether the escalating political spat between Australia and China is starting to bite with rural exports falling 15.1 per cent in July, the biggest monthly decline since January 1983.
“Our largest trading partner has recently imposed tariffs, duties and anti-dumping measures on our wine, barley and beef exports,” Mr Felsman said.
But ANZ economists do not expect the decline in the trade surplus is the beginning of a trend because of demand from China for resources, particularly iron ore, over the coming months.
National Australia Bank global head of research Ivan Colhoun said imports had weakened sharply in recent months partly because of supply chain disruptions during the pandemic.
“This month’s data, however, shows a strong bounce in imports, likely reflecting some recovery in supply chains,” he said.
New construction data also showed the industry remains in deep decline, not helped by the harsh COVID-19 restrictions in Victoria.
The Australian Industry Group/Housing Industry Association performance of construction index fell 4.8 points to 37.9, well below the 50-mark that separates contraction in the sector from expansion.
“The sharp fall in activity in Victoria was a major factor in the downturn while border restrictions in other states have hampered builders and constructors who are reliant on interstate supplies and the availability of tradies from across borders,” Ai Group head of policy Peter Burn said.
The first recession since the early 1990s has already seen the number of people unemployed rise to over a million people and Treasury predicts a further 400,000 jobs could be lost by Christmas.
But Treasurer Josh Frydenberg believes there is hope for the future and has promised to make job creation part of next month’s budget.
“There is a light at the end of the tunnel, and the Morrison government is absolutely committed to getting Australians back to work,” he told parliament.
Even so, leading economists are bracing for a bumpy road to recovery.
Westpac chief economist Bill Evans said the June quarter national accounts were “devastating but not an unexpected collapse”.
“Clearly we won’t see another collapse in consumer spending but we have seen this movement to stage four restrictions in Victoria,” Mr Evans said about the outlook for the September quarter.
He expects Victoria will be a big negative on growth in the September quarter, leaving the national result broadly flat.
But in the December quarter, with Victoria’s restrictions wound back to a degree, it could see the national economy grow by 2.5 per cent.