Elevated Australian trade surpluses keep coming as the surplus for June reset to a new record high of $17.7bn. Surging commodity prices are continuing to drive export earnings higher, boosting national income. The wider resumption of offshore travel is supporting rising imports.
International Trade — June | By the numbers
- Australia's trade surplus was $17.7bn in June, up from $15bn in May (revised from $16bn) defying the consensus for a fall to $12bn.
- Exports advanced by 5.1% rising to $61.5bn, the 6th month running in which exports have reset to a record high, the level now up 41.4% over the year.
- Imports firmed by 0.7%m/m to $43.9bn, also standing at a record high having risen by 33.5% over the year.
International Trade — June | The details
Australia turned out a record breaking quarter in international trade as the trade surplus came to $45bn for the 3-months to June, a substantial rise from $29bn in Q1. The key theme has been surging exports with commodity prices rising sharply as existing supply/demand imbalances in the market were exacerbated by the Ukraine war. Export earnings rose another 5.1% in June to be up by almost 15% over the quarter. Imports were 0.7% higher in June, posting a 5.3% rise in the quarter. The key factors were the surge in fuel imports reflecting soaring prices and the rebound in the services sector taking shape as offshore travel restrictions eased.
Roughly half of the rise in exports in June came from the volatile non-monetary gold component, with broadly equal contributions coming through from rural goods and non-rural goods. Across the quarter, non-rural goods led the way rising by 15.7% on the tailwinds from surging commodity prices. This boosted earnings from coal (37%), other mineral fuels (inc LNG) (20.7%) and metals (12.5%), while iron ore saw a relatively modest increase (3.5%).
Prices for many agricultural commodities also rose sharply in response to the Ukraine war. As a major exporter of these products, Australia's rural sector saw an earnings boost. Meat exports were up 12%q/q, cereals and grain rose by 5.6%q/q, wool saw an uplift of 18.1%q/q and other rural products increased by 4.4%q/q.
Turning to imports, expenditure in June lifted by 0.7% for an overall rise of 5.3% through the quarter. The major contributors over the past 3 months have been the services sector (14.8%q/q) as the post-pandemic recovery started taking shape, tourism services rising almost 70% in response to eased offshore travel restrictions; while intermediate goods advanced strongly (6.4%q/q) as fuel surged (36.9%q/q) on the back of soaring prices. Consumption goods softened slightly (-0.5%q/q) due mainly to a pullback in vehicle imports. Capital goods were up by 2% in the quarter, with machinery and industrial equipment continuing its upswing (9%q/q).
Taking a closer look at services trade in tourism spending, overseas tourism is seeing a much faster rebound than inbound tourism, though both are still well below pre-pandemic levels.
International Trade — June | Insights
Surging export earnings boosted Australian national income during the June quarter, with the terms of trade likely to have risen to a new record high. This is a vastly different situation to the European and UK economies which have endured a negative terms of trade shock as commodity prices escalated. International trade is also likely to have contributed strongly to domestic economic growth, potentially adding around 1ppt to Q2 GDP.