Australia's trade surplus widened sharply in September to $12.4bn after narrowing to an average of $8.8bn over July and August. Export earnings accelerated on rises in commodity prices and an easing in weather-related disruptions while import spending slowed. The terms of trade came off its record high in Q3 and net exports are likely to subtract from September quarter GDP, unwinding much of their sizeable contribution to activity in the previous quarter.
International Trade — September | By the numbers
- Australia's trade surplus widened out to $12.4bn from $8.7bn (revised from $8.3bn), defying expectations for a broadly steady outcome ($8.8bn).
- Exports found renewed strength to rise by 7.0%m/m to $60.6bn, advancing by 39.9% over the year to sit just off record highs. Exports lifted by 2.7% (revised from 2.6%) in August.
- Imports slowed to a 0.4%m/m increase following strong rises in July (5%) and August (4.1%) but lifted to a new record high at $48.2bn (44.7%yr).
International Trade — September | The details
The nation's trade surplus narrowed sharply in July and into August due to a combination of lower commodity prices and disruptions to shipments weighing on exports, and strong rises in import spending. Those factors waned in September: shipment volumes for resources rebounded from weather-related disruptions and LNG prices surged driving up exports while a sharp fall in consumption spending held back imports.
For the quarter, however, the trade surplus was lower, retracing by 31% to around $30bn. That occured as exports fell by 0.7% and imports surged by 9.4%. Those outcomes partly reflect a decline in the terms of trade, with export prices down by 3.6%q/q and import prices rising by 3%. This will impact the contribution to Q3 GDP growth from net exports, which is likely to unwind much of its large positive addition to growth in the June quarter of 1ppt.
On the export side, the 7% lift in income in September was largely generated by rises in non-rural goods (8.5%) and rural goods (2.8%). Metal ores (8.7%) and other mineral fuels (inc LNG) (19.5%) drove non-rural goods. Surging prices and demand for Australian cereals and grain (6.6%m/m) amid the supply disruption caused by the Ukraine war have pushed up the value of those exports by more than 80% over the past year.
The post-pandemic recovery in the services sector continues but has established strong momentum after the restrictions on inbound travel were lifted. Services spending expanded by 11.1% in the quarter.
Import spending was relatively flat in September (0.4%) but strongly higher over the quarter (9.4%). In the month, consumption goods fell by 7.2% as both vehicle (-14.6%) and other goods (-12.9%) pulled back from strong rises in August. That weakness was offset by rises in capital (5.1%) and intermediate goods (2.9%). Capital goods were boosted by the arrival of aircraft and other goods. The rise in intermediate goods came overwhelming on the back of fuel imports (12.2%), which have surged by 141% over the past year due to elevated global oil prices.
The services sector is seeing a rapid recovery from the pandemic, driven by strong demand for overseas travel by Australians. Tourism-related spending lifted 3.4% in September and 43.1% in the quarter.
International Trade — September | Insights
Net exports are likely to unwind after contributing strongly to GDP growth in the June quarter. Although the terms of trade fell in the quarter, the dynamic is still a positive one for Australia. Elevated revenue generated by exports is shielding the economy from an income shock from higher goods and energy prices. It is also supporting the post-pandemic rotation in spending from goods to services.
