Australia's trade balance swung back to a surplus in June ($1.9bn) from a deficit in May (-$2.4bn), continuing its recent volatility. Non-monetary gold and iron ore drove exports to their fastest month-on-month rise (9.6%) since the start of 2022, overhauling imports that fell slightly (-0.2%). Although export earnings remain elevated, import spending almost drew level in the June quarter amid the Gulf conflict and oil price shock as well as the domestic data centre buildout, the driving factors behind the deterioration in Australia's trade position.
The trade balance returned to surplus in June ($1.9bn) from a deficit in May (-$2.4bn, revised from -$3bn in today's release). Australia's 8-year run of trade surpluses was disrupted back in March following the oil price shock due to the conflict in the Gulf, though other factors had contributed to narrowing surpluses over the past couple of years, including tariff-related uncertainty and lower commodity prices. The trade surplus for the June quarter was just $1.1bn, narrowing from $5.8bn in the March quarter.
However, rather than being driven by falling commodity prices, the recent deterioration in Australia's trade position has come from an unlikely source. Imports have surged - partly due to the oil price shock from the disruptions to supply in Gulf, but also from the data centre buildout. The chart below illustrates this point, showing a breakdown of international trade so far this year. Exports (green bars) have remained at elevated levels, but imports (yellow bars) have accelerated.
Turning to June's figures, exports rose by a sharp 9.6% to $48bn - the fastest rise since January 2022. Safe-haven demand supported non-monetary gold exports (60.2%), while an uptick in prices lifted the value of iron ore exports (6.2%). Over the quarter, exports increased by 4.2% to $138.3bn, with gains led by the major commodities: iron ore 7.6%, coal 19.3% and LNG 8.6%. Non-monetary gold pulled back over Q2 (-12.5%).
Imports were broadly steady in June (-0.2%) coming in at $45.8bn. For the quarter, imports accelerated by 8.1% to $137.1bn as spending on fuel imports (part of intermediate goods) climbed almost 62%. However, in May and June, fuel imports declined by 8.3% and 11.9% respectively as tensions in the Gulf eased, allowing vessel traffic through the Strait of Hormuz to come back on line.
After surging in recent months to facilitate the data centre buildout, capital goods imports have retraced, down 4.5% in June. ADP equipment has pulled back after almost tripling in March.
Meanwhile, consumption goods softened in June (-0.8%) but was still up by 4.4% in the quarter, supported strong demand for vehicles (non-industrial transport equipment) (28.2%), notably EVs.
