Australia’s trade balance returned to a deficit in May, after the first surplus in six years in April.
But don’t worry, there’s every possibility that in a month or two’s time, the April surplus of $12 million (the first for six years) will be larger and May’s deficit will be a surplus.
Welcome to the wild and wacky world of accounting for our resources boom, specifically our coal and iron ore boom, plus the great oil surge.
The nitty gritty is: according to figures from the Australian Bureau of Statistics, May’s trade deficit was $965 million ($927 million) compared with a revised $12 million surplus in April, which was originally a deficit of $958 million when the April figure was first released a month ago.
Economists had forecast $900 million deficit, after imports jumped 6% in the month, driven by the surging oil price. That will be repeated in June’s figures.
The ABS detailed the drivers behind the 6% jump in the cost of imports to $22.8 billion in May from April. The cost of fuels and lubricants jumped 17% and imports of transport equipment increased 12%.
Exports rose 1% to $21.9 billion in May from April. Agricultural shipments rose 2% and coal 13%.
But the 5% rise (or $223 million) in the value of exports of metal ores and minerals made no allowance for the surging in iron ore prices: up 96% for Rio Tinto alone, and probably the same or a bit more for BHP Billiton.
When that pricing is all settled, the figures will be backdated and existing data restated and it could very well be the trade deficit is converted into another surplus.
Until April’s revised surplus, our trade balance had been in deficit since March 2002, and widened to a record $3.22 billion in February as exporters battled bottlenecks at mines and congestion at ports and railways and heavy rain in Queensland slowed, and in some cases halted completely, exports of high value coking coal to steel companies in Asia and Europe.
The trade figures at last show that there is a silver lining for the resources boom, even though it’s been going on since 2005.
These infrastructure problems in rail and port transport in Queensland and NSW, plus a long list of weather problems in the past three years in Queensland, Western Australia and the Northern Territory, had clipped our ability to get full value from the surging demand for our resources.
Now, with coking and steaming coal prices up, and iron ore booming, the surging value of our oil and gas exports will add a further $40 billion in revenues over 2008-09, if forecasts from the Australian Bureau of Agricultural and Resource Economics are accurate.
This rising national income is set to surge as the financial year goes on and that worries the Reserve Bank.
But this week we saw the surging cost of oil, and its impact on inflation and the wider economy, become probably the most important threat being monitored by the RBA.
There’s no doubt that the domestic economy is sliding towards a bit of a thumping landing. Retailing has gone cold, despite the 0.7% rise in sales in May.
The Just group’s earnings downgrade, off the back of lower sales estimates, gives lie to the ABS figures, as does anecdotal reports from other chains and small traders about how sales came to a halt in May, and that had continued into last month.
Building approvals are sliding, perhaps a couple of months away from reaching bottom where they will stay until interest rates and oil prices start easing.
And this week also saw suggestions of a slowdown in manufacturing (as there was in the UK, where retail sales are also tanking).
Yesterday the services sector was shown to have contracted last month.
Australia’s services sector performance fell to a record low and contracted for the third successive month in June, thanks to the damage caused by high petrol prices and interest rates.
The Australian Industry Group/Commonwealth Bank performance of services index fell 4.3 index points in June to 45.4 points: that’s the lowest since the survey started in early 2003.
Australian Industry Group chief executive Heather Ridout said the weakness in services activity was broad-based.
"The rising price of oil – to above $US140 per barrel – and high interest rates have significantly dented consumer and business confidence with little prospect of a reprieve in sight," she said in a statement.
"The rising price of oil led to the fastest rate of input cost growth since the survey’s inception."
Activity expanded in just two of the services sectors in June, down from four in May.
Significant pressure on discretionary spending contributed to contractions in retail trade, accommodation, cafes and restaurants and personal and recreational services.
