ORESOME RESULT BOOSTS SURPLUS
STRONG iron ore exports and prices and a weaker Australian dollar have pushed the trade surplus to a record $5.75 billion.
The nation’s trade surplus hit the new record in May, rising 19 per cent in seasonally adjusted terms from $4.8 billion in the prior month.
The new record handily beat expectations of a $5.25 billion surplus economists had been tipping.
The surprisingly strong rise, confirmed in numbers released by the Australian Bureau of Statistics yesterday, could put a federal budget surplus within reach a year early, economists said.
Overall, seasonally adjusted exports were up 4 per cent for May to $41.6 billion. Imports increased 1 per cent to $35.8 billion.
The major reason for the $925 million increase in the trade surplus was iron ore, with the value of metal ore and minerals exports jumping by $1.3 billion, or 13 per cent, to $11 billion.
Iron ore exports to mainland China rose by $1 billion, while iron ore exports to Japan were up by $222 million.
While iron ore prices have spiked this year, the data indicated that increased volume was far more of a factor in May than higher realised prices. Lump iron ore exports were up by $455 million, with quantities up 19 per cent and unit values up 2 per cent.
Iron ore fines were up $822 million, with quantities up 11 per cent and unit values up 4 per cent.
Exports of hard coking coal – the kind used in steelmaking – were up $477 million, with quantities up 25 per cent and unit values down 3 per cent.
China accounted for $262 million of that rise, or 58 per cent, with exports to Belgium, India and the Netherlands also all up by between $133 million and $117 million.
Exports of thermal coal – used to generate electricity – were down by $29 million, with increased exports to South Korea failing to outweigh a drop in exports to Japan.
JP Morgan analyst Tom Kennedy called the stronger iron ore export volume “an encouraging development for real GDP”.
Westpac analyst Andrew Hanlan noted the increased exports would be boosting mining profits and in turn tax revenues, providing the Federal Government with fiscal flexibility.
“There is the possibility that the federal underlying cash balance edged into surplus in the 2018-19 financial year, one year ahead of schedule and the first surplus since 2007-08, ahead of the impact of the GFC,” Mr Hanlan said.