KEY POINTS
- The monthly trade deficit totalled $965 million narrowed in May 2008 (current prices)—this follows a (revised) trade surplus of $12 million in April.
- Japan is Australia's largest export market, accounting for $32.4 billion in the 12 months to the end of April 2008. This is followed by China ($25.1 billion), Korea ($13.4 billion) and the United States ($10.3 billion).
- Resource and manufactured export volumes have continued to expand strongly over the past year and services sector export volumes have also contributed strongly.
- ABARE forecasts that commodity export earnings will increase by 40 per cent to $212 billion in 2008–09. Exports from the minerals and energy sector are forecast to increase by 48 per cent to $178 billion, exports from the farm sector are forecast to increase by 12 per cent to $30 billion and exports from the non-farm rural sector are expected to increase by 5.0 per cent to $4.1 billion.
- The Australian dollar, measured by the RBA's trade weighted index has appreciated strongly in recent months to be near its highest levels in 23 years. The appreciation of the exchange rate has coincided with a substantial increase in Australia’s terms of trade.
FACTS AND FIGURES
The monthly trade deficit—as reported in the ABS international trade in goods and services—totalled $965 million in May, following a $12 million trade surplus recorded in April. The May deficit was $156 million less than in May 2007.
Total exports rose by 1.5 per cent in May 2008 in value terms to $21.9 billion—this is 19.5 per cent higher than the same month of the previous year. This increase was driven by non-rural commodities which rose by 1.6 per cent in May, while rural goods exports rose up by 2.2 per cent. Services exports edged up by 0.7 per cent in May.
- Total imports rose by 6.0 per cent in May to $22.8 billion—this is 17.0 per cent higher than a year ago.
Exports by industry
Total industry exports (current prices) totalled $216.3 billion over the year to May 2008—this is
94.9 per cent higher than the total for the year to May 1998.
- Agricultural exports accounted for 4.0 per cent of total exports in the 12 months to May 2008, down from 8.9 per cent in the year to May 1998.
- Mining exports accounted for 31.7 per cent of total exports in the year to May 2008, well above the 19.0 per cent in the 12 months to May 1998.
- Manufacturing exports accounted for 40.8 per cent of total exports in the year to May 2008, down from 47.6 per cent in the same period in 1998.
- Services exports accounted for 23.2 per cent of total exports in the year to May 2008, slightly down from 23.9 per cent in the year ending May 1998.
Export volumes and values
Export volumes—as reported in the ABS balance of payments—grew by 0.5 per cent to $52.3 billion in the March quarter 2008, while export values grew by 4.2 per cent to $56.9 billion. The modest increase in export volumes reflects a stable export position across the board with no sector recording significant swings in April 2008. Both resource and manufactured export volumes have continued to expand strongly over the past year and services sector export volumes have also contributed strongly. Over the 10 years to the March quarter 2008, export volumes have increased by 35.5 per cent, while export values have dramatically increased by 101.4 per cent (see chart 1).
The Australian dollar, measured by the RBA's trade weighted index has appreciated strongly in recent months to be near its highest levels in 23 years. The appreciation of the exchange rate has coincided with a substantial increase in Australia’s terms of trade—reflecting among other things, the strength in commodity prices. The terms of trade (which is at its highest ever level) represents a sizeable boost to national income. Resources prices are no longer rising rapidly, but there are currently no signs of any "unwinding" in the commodity price boom either.
Australia's export destinations
Japan is Australia's largest export market, accounting for $32.4 billion in the 12 months to the end of April 2008. This is followed by China ($25.1 billion), Korea ($13.4 billion) and the United States ($10.3 billion). China is Australia's largest two-way trading partner (imports and exports), followed by Japan, the United States and Korea.
Agricultural and resource export forecasts
In its Australian commodities report, the Australian Bureau of Agricultural and Resource Economics (ABARE) forecasts that Australia's commodity export earnings will increase by 40 per cent in 2008–09 to $212 billion.
ABARE believes that minerals and energy exports will be the primary driver of the increase—expected to increase by 48 per cent to $178 billion. An increase in volumes as well as prices is forecast for many minerals and energy commodities in 2008–09. Price increases are forecast for iron ore, coal, crude oil, gold and aluminium.
Export earnings from the farm sector are expected to increase by 12 per cent to $30 billion. ABARE forecasts that agricultural exports will increase in wheat, barley, canola, pulses, grain sorghum, cotton lint and seed, sugar and wine. Winter crop production in Australia is forecast to increase by 65 per cent and export earning from these crops are expected to increase by 66 per cent.
ABARE forecasts that exports from the non-farm rural sector (fishing and forestry) will increase by 5.0 per cent to $4.1 billion in 2008–09.
ABARE Acting Executive Director, Karen Schneider notes, 'While the forecast recovery in the farm sector performance is very encouraging, the strength of Australia's minerals and energy exports continues to underpin commodity sector performance… The price outlook across minerals and energy commodities remains positive, reflecting continued strong demand and only modest world supply growth'.
Source: ABS Cat. No. 5302.0