Dollar Down, Exports Up

2:07 AM Mon 8 Dec 2008 GMT

'Exports are up, but that is just one facet of the economic indicators.' .

Australia's trade balance soared to a record surplus in October as a falling local dollar boosted the value of exports.

Economists said the rise in exports receipts was likely to support the economy in the final quarter of 2009, with the October trend expected to continue in November and December.

The balance of goods and services was a seasonally adjusted surplus of $2.952 billion in October, according to the Australian Bureau of Statistics (ABS).
It was Australia's fourth trade surplus in the past five months and the best since the start of the data series in 1971, dwarfing the previous record of $1.540 billion set in June 1997.

Market economists had forecast a trade surplus of $1.6 billion.

High commodity prices in October, improved farming conditions and a falling Australia dollar led to a seven per cent increase in the value of exports.
By value, rural exports were up 12.9 per cent, largely due to cereals, which rose up 18 per cent, and meat, which rose 14.8 per cent.

Amongst non-rural goods, exports of coal, coke and briquettes grew by 20.3 per cent.

'The growth in exports was no doubt influenced by the almost US 20 cent fall in the currency in the month, pushing Australian dollar export receipts higher,' ANZ economist Alex Joiner said.

The Australian dollar lost about 17 per cent of its value against the US dollar in October.

Its decline against the Japanese yen was even more pronounced, with the local currency backpedalling 21 per cent against the yen in that period.
Commonwealth Bank of Australia senior economist Michael Workman said the upbeat trade result was positive for December quarter gross domestic product (GDP) growth.

'Early signs are that the export side in the December quarter will be positive overall for the GDP result,' Workman said.

'The Queensland coal exporters are saving Australia as well as driving Australia ... they're saving the city slickers.'

Exports totalled $23.303 billion in October, an increase of more than $10 billion from a year ago thanks largely to a commodity price boom.

But Dr Joiner said a more stable Australian dollar and slumping US dollar denominated commodity prices could threaten the surplus heading into 2009. 'Not to take the shine off this cracking surplus, but today's result has been driven primarily by price changes in exports not volumes,' Dr Joiner said.

Australian boats for export are competing against cut-price US brands. - .. Click Here to view large photo

It was a different story on the debits, or imports, side of the equation, which highlighted the softness in the domestic economy.

Imports increased by a slender $66 million to $25.189 billion in October, which St George Bank treasury economist Amanda Tan said was in line with the broad slowdown in the economy.

'Much slower economic conditions and the weak Australian dollar could cause imports to remain weak,' Tan said.

Imports of capital goods, such as machinery, civil aircraft and transport equipment, declined 2.2 per cent.

Consumption goods, including food and beverages, household electrical items and clothing, grew by about two per cent.

The Australian economy grew by 0.1 per cent in the September quarter, its worst result in eight years. December quarter growth figures won't be released until March 4 next year.

by Jeni Bone

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