Australian trade surplus hits record high in December on stronger exports to China

Australian trade surplus posted a mammoth gain in December, with the trade surplus rising to AUD3.5 billion (recorded since the series started in 1971), from an upwardly revised AUD2.0 billion in November.

The sizeable gain was driven by a spike in the value of coal and metal ores exports (up 13.7 percent and 9.7 percent respectively). Importantly, the lift in the value of these exports was led by both soaring commodity prices and higher volumes. Meanwhile, imports edged 0.7 percent higher, reported ANZ in its research note.

The value of total exports rose a solid 5.8 percent in December – with a sharp acceleration in resource exports (+9.7 percent), driving the gains. Exports of coal and coke jumped by AUD705 million in December, a significant increase of 13.7 percent m/m. Exports of metal ores and minerals – largely iron ore – also accelerated, rising by AUD 682 million (+9.7 percent).

Importantly, the lift in the value of these exports was led by both strongly rising prices and higher volumes. Rural goods also contributed to the surge in export values, rising by a solid 2.0 percent m/m. The value of services exports edged higher, up 0.1 percent m/m.

The ANZ in its research note added that the value of total imports rose by +0.7 percent m/m in December. The prime driver was a pick-up in consumption goods imports, which rose a solid +2.0 percent m/m. Imports of intermediate good also ticked higher, up 1.5 percent m/m. Partially offsetting this strength, imports of capital goods dipped by 2.2 percent.

The improvement in the trade balance in November and December is likely to provide some support to Q4 GDP, with our estimates suggesting a solid contribution from net exports.