Australia has knocked its December trade surplus out of the park, according to Westpac, with the result the largest on record “in dollar terms” and easily exceeding both market and Westpac expectations.
The national trade surplus expanded by a record 72 per cent on the $2 billion reported in November, effectively breaking Australia’s miserable run of some 30 consecutive months of deficits and marking a stunning turn-around on the $4 billion plus deficit of just 12 months earlier.
Buoyed by a two-quarter spike in strength across commodities, exports leapt in dollar terms to reach $3.5 billion, far ahead of the market median $2 billion and more than double Westpac’s initial forecast of $1.5 billion.
According to Trade Minister Steven Ciobo, Australia’s annual exports in 2016 also rose by 4.2 per cent to a record high of $329 billion.
"This record growth was driven by large increases in LNG, coal, gold, iron ore and services including both tourism and education. This growth comes despite a slowdown in global trade," Ciobo said in a statement.
The Australian Bureau of Statistics (ABS) data, released Thursday, had the value of exports rising by 5 per cent to $32.6 billion, while imports also nudged slightly higher, up 1 per cent, “reflecting higher volumes and broadly flat prices".
This means the last three months of 2016 delivered a surplus of $4.8 billion, an eye-watering turnaround of $8.6 billion on the $3.8 billion deficit shown for the three months to August.
According to Westpac senior economist, Andrew Hanlan, where Westpac had “anticipated a corrective pull-back”, rural goods unexpectedly continued to climb, increasing a further $104 million, after a previous jump of $563 million.
“The bulk of this improvement was driven by higher commodity prices boosting export earnings," he said, adding that this strength was also evident in metal ores, coal and gold.
“Exports jumped sharply, while imports rose modestly, as anticipated,” Hanlan said. Earnings on exports also increased by 5.4 per cent, or $1.7 billion, against a Westpac forecast of 1.3 per cent.
Hanlan said export earnings rose by “around 12 per cent in Q4, of which about 10 per cent is due to higher prices and around 2 per cent from increased volumes".
“This is an improvement on the past two quarters when net exports surprised by making small negative contributions, of -0.1ppts in Q2 and -0.2ppts in Q3," he added. “Our initial calculations indicate that real net exports made a very small positive contribution in Q4, of 0.1ppts - matching our forecast."
Australia’s previous record surplus was $2.24 billion in February 2009, while a spiraling trade imbalance saw the deficit blow out to a record $4.3 billion just last year.