- Tom Kennedy, JP Morgan economist
Australia's trade deficit narrowed more than expected in January as imports declined, while resource exports showed surprising resilience. The nation's trade shortfall contracted from a revised $3.52 billion in December to a seasonally adjusted $2.94 billion in January, according to the Australian Bureau of Statistics, beating economists forecast of a $3.22 billion gap. Exports increased 1% on month to $25.55 billion, led by a surge in non-rural exports such as minerals. At the same time, imports dropped 1.0% to $28.49 million.
Precipitous downturn in global commodity prices hit hard Australia's terms of trade. Prices of iron ore, one of Australia's biggest export commodities, plunged from more than $180 per tonne in 2011 to around $40 per tonne in recent months. However, the depreciation of the Australian Dollar and a rebound in mineral resource exports has helped soften the effect on the nation's economy from the commodities downturn. Yet, the sharp decline in mining investment continues to drag on economic growth. Data released earlier in the week showed the South Pacific economy expanded 0.6% in the final quarter of 2015, supported by household consumption. Measured on an annual basis, Australia's economic output surged 3.0% last quarter, far outpacing the 2.5% rate predicted by analysts.
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