- Stephen Walters, chief economist at JPMorgan
Australia's trade deficit widened in December to an eight-month high, as mining exports declined sharply, suggesting net exports are likely to make a negative contribution to GDP in the fourth quarter. Australia posted a seasonally adjusted trade gap of A$3.54 billion in December, compared with a shortfall of A$2.73 billion in the prior month, according to the Australia Bureau of Statistics. Exports plunged 5% in December, led by falling agricultural and iron-ore shipments, while imports slipped 1%. Australia's trade accounts have been suffering from falling prices for major exports like iron ore and coal, with a downturn in China's economy hitting hard.
A separate report showed the number of Australian home building permits rebounded in December. Consents surged 9.2% on month in December, overshooting economists' expectations twofold. Despite recent signs of loss of momentum in the housing sector, 2015 was a year of robust housing construction, contributing strongly to growth. However, the outlook for 2016 is less optimistic, with residential investment and construction to falter a little following strong few years. Some economists predict the slowdown will eventually bring the RBA off the side-lines with at least two rate cuts by the end of the year. Market participants are now pricing in a 36% probability of an interest rate cut by April, with the bets on a rate cut by July surging to 76%.
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