Australian Trade Gap Widens

Australia's trade deficit widened to a record in February as floods and cyclones disrupted exports of coal and iron ore
Bloomberg 4/6/2008 7:42:19 PM

The shortfall expanded to A$3.29 billion ($3 billion) from a revised A$2.54 billion in January, the Bureau of Statistics said in Sydney today. The median estimate of 25 economists surveyed by Bloomberg News was for a A$2.5 billion gap.

The worsening trade deficit may further curb the economy, which grew at the slowest pace in more than a year in the fourth quarter as resource shipments dropped. Deliveries of coal from BHP Billiton Ltd. and other producers have been hampered by floods, while cyclones led to the temporary closure of oil fields and iron- ore export ports this year.

Exports fell 4 percent and imports were unchanged in February from the previous month, today's report showed.

The Australian dollar bought 92.04 U.S. cents at 11:37 a.m. in Sydney from 91.96 cents immediately before the report. The yield on the benchmark two-year government bond fell 1 basis point to 6.20 percent. A basis point is 0.01 percentage point.

The highest borrowing costs in almost 12 years are leaving households with less money to spend on imported goods, and forcing companies to cut investment in foreign-made machinery. The central bank raised its benchmark interest rate by a quarter point to 7.25 percent last month, after a similar move in February.

The monthly trade balance has been in deficit since March 2002 as exporters battled bottlenecks at mines and congestion at ports and railways. Farm production was cut by the worst drought in a century in the southern parts of the nation.

Economic growth slowed to 0.6 percent in the fourth quarter as transport constraints reduced exports from Australia, the world's largest shipper of coal, iron ore and wool.

Floods in northeast of the country have also constrained shipments of natural resources. BHP Billiton Ltd., the world's biggest mining company, said on Feb. 25 that heavy rain in Queensland may cut its share of coal output from two ventures by as much as 15 percent of last year's total.

Overseas shipments account for about 20 percent of gross domestic product.

Still, the government predicts exports of raw materials will increase by the most in 29 years, driven by demand from China. Resource-export sales may surge 30 percent to a record of A$189.1 billion in the year ending June 30, 2009, the Canberra-based Australian Bureau of Agricultural and Resource Economics said on March 4.

Prices for Australia's top five commodity exports -- iron ore, coking coal, thermal coal, gold and crude oil -- have risen to records this year.

Total exports fell to A$18.26 billion in February, today's report showed.

Exports of good and services fell 4 percent and non rural goods dropped 7 percent, including a 16 percent slump in coal sales. Metal ores and minerals slipped 18 percent.

Australian Trade Gap Widens