Australia's trade surplus widens to $8.2bn in June

Australia posted another elevated trade surplus in June of $8.2bn as exports saw a sharper rebound than imports after recent weakness prompted by the COVID-19 crisis. For the June quarter, net exports are likely to contribute positively in what will be a historically large contraction in GDP.   

International Trade — June | By the numbers

• Australia's trade surplus advanced by $861.0m in June to $8.202bn, though this was weaker than $8.8bn level expected, while May's surplus was revised sharply lower to $7.341bn from $8.025bn.  

• Export earnings lifted by 3.5%m/m to $36.186bn after falling by 6.7% in May (revised from -4.3%). The decline in annual terms moderated to -14.9% from -16.9%. 
• Import spending ended a run of 5 straight monthly declines — the steepest of those coming in May (-6.7%) — with a 1.3% increase in June to $27.984bn. This saw the contraction over the year slow to -19.3% from a record low in May of -23.2%.

International Trade — June | The details

The trade surplus in June came in at $8.202bn after surpluses of $7.864bn in April and $7.341bn in May. After seasonal adjustments are applied, the ABS reported that its preliminary estimate for the trade surplus in the June quarter was $24.086bn; an increase of $5.033bn (+26.4%) from Q1.   

On exports, total earnings recovered by 3.5% in June (or $1.219bn) to $36.186bn, albeit after falling by 16.9% over April-May (-$3.559bn). There were broad-based gains in earnings in June led by non-monetary gold (+$687.0m) and by services (+$260.0m) on the back of spending by overseas students still in Australia. Non-rural goods lifted by $144.0m, though this obscured a large increase from iron ore exports ($941.0m) as other mineral fuels (LNG) (-$788.0m) and coal (-$456.0m) were hit by weaker prices. Rural goods firmed by $125.0m due to increased demand for cereals.    

  

Import spending lifted by 1.3% in June ($358.0m) to $27.984bn, though weak domestic demand conditions into the pandemic resulted in a plunge of 22.6% (-$8.056bn) over the preceding 5-month period. The modest lift in June was driven by a $318.0m increase in goods spending, with consumption goods up by $549.0m and intermediate goods lifting by $429.0m. These increases were moderated by weakness from capital goods (-$125.0m) and non-monetary gold (-$534.0m). Services imports remain very low at $3.879bn reflecting the impact of the overseas travel ban due to the pandemic.  

   

International Trade — June | Insights

The onset of the pandemic has severly impacted global trade flows and Australia was no exception. Over the June quarter, export earnings fell by around 8%, though the import side saw a much greater contraction of 13.7%. The arithmetic means net exports are likely to add to GDP growth in Q2, though it will ultimately mean little in the context of the scale of the shock sustained by the domestic economy as the pandemic hit.