Trade surplus flattering

Data disguises underlying economic weakness

AUSTRALIA’S record trade surplus is masking weaker demand at home for imports, falling housing approvals and the biggest stock market drop in 18 months.

The latest economic data shows Australia is exporting heavily, particularly to China, but demand for imports has fallen 4 per cent in a month.

Australian Bureau of Statistics data released yesterday shows the national trade surplus is now at a record $8 billion, with exports climbing 1 per cent from May to June.

“Export earnings have been boosted by higher commodity prices, while import volumes are soft at a time of weak domestic demand and with the lower dollar making imports more expensive,” Westpac’s Andrew Hanlan said yesterday.

But the number of new housing approvals dropped 1.3 per cent from May to June, a fall of more than 20 per cent compared to June 2018.

There were 14,501 new dwellings approved nationwide in June, with apartment numbers dropping 29 per cent compared to the same point last year. The drought also is hurting sheep and lamb numbers, with the number of sheep slaughtered down 13 per cent over the past year, and lambs down 9.3 per cent.

The bad news for the economy came as the Australian share market shed nearly two months of gains in the first half-hour of trade, plummeting more than 2.5 per cent following big losses on Wall Street.

The market turmoil, sparked by Us-chinese trade tensions, appeared to flare up after the US Treasury Department said it had determined that China was manipulating its currency. Treasury Secretary Steven Mnuchin “will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions”, the department said.

Analysts said Australia was relatively insulated from the trade war.

“Export shipment volumes from major Australia ports are back at record highs and continue to signal Chinese demand for iron ore/coal is still robust,” JP Morgan’s Tom Kennedy said.