Aussie terms of trade drop for fifth straight quarter

AUSTRALIA’S TERMS of trade, a measure of export income, fell for a fifth straight quarter in the three months to December 31, exacerbating a hit to national income that threatens to deepen Labor’s budget challenge.

Australian Bureau of Statistics figures showed prices received by exporters fell 2.4 per cent from the September quarter, led by a 10.2 per cent slump in coal and a 3.7 per cent decline in metal ores. Import prices rose 0.3 per cent.

Analysts expect the decline to have halted in January, when prices for most of Australia’s biggest commodities staged a rebound. But the numbers suggest the economy continued to suffer during the fourth quarter from a negative drag caused by slower export revenue growth.

Analysts now estimate the terms of trade declined last quarter by an additional 2 percentage points, and are now 17 per cent lower than the September 2011 peak.

‘‘We’re in this zone where, even though commodity prices are high in level terms, the fact they’re falling is making exporters uncertain about the outlook,’’ JPMorgan economist Ben Jarman said. ‘‘And of course the currency isn’t falling with them, which is adding to the pain.

‘‘The corporate sector is seeing its top line ebbing away, and that makes it very hard to argue that hiring should be pursued at this point.’’

The waning terms of trade saw nominal growth in gross domestic product slow to a crawl in the three months to September 31, sapping federal government tax revenue and putting downward pressure on incomes across the economy. The latest trend increases pressure on companies to boost productivity in order to

Prices received by exporters fell 2.4 per cent from the September quarter.

maintain profitability.

Offsetting Thursday’s trade news were reports pointing to a recovery in new home sales and a minor recovery in demand for credit in December, which rose 0.4 per cent from November, when it was flat.

The gain equalled the largest increase since September 2011, and supports the Reserve Bank of Australia’s view that more signs of the impact of official interest rate cuts will emerge in coming months.