Australian balance of trade back in surplus

Hi,

Trade balance swings to surprise surplus

smh said:
Australia's terms of trade - what it gets of exports compared to what it pays for imports - climbed 4.2 per cent in the first quarter alone and could rise 20 per cent this year.

That in turn will shower money on the economy via higher profits, investment, wages and tax receipts.

"Today's data provide a reminder of one of our long held themes which we continue to think will underpin above trend growth going forward," said Su-Lin Ong, a senior economist at RBC Capital Markets.

"The recovery in the terms of trade which began in late 2009 is accelerating and will deliver a strong boost to income and demand, assisting in some rotation of growth away from public spending to firmer private sector demand."

Consumers certainly seemed to be confident enough to splash on big-ticket items, with industry figures out Thursday showing sales of new vehicles hit a record for May.

Burgeoning terms of trade, rising paypackets, reducing unemployment, Nice... Wouldn't want to live anywhere else in the world right now! :D

Cheers,
Michael
 

nearly spat my latte out over the keyboard reading the last 2 paragraphs. Yeh sure Ross, let's all sarifice our standard of living so we can sell agricultural products to countries that can't afford them.

Howz about ross, you devalue your currency and i will trade with you. I will then pay you your hourly rate 24/7 - what a deal! when you arent reasearhign for me you can drop the kids at school, wash the car, whatver. All good tho - you are selling so many hours of really high paid labour!
 
.....shower money on the economy
:eek: Eeeekkk! I'm getting wet.....Ooooooh!:D

I've got f-ck all work these days and it aint good for the rest of the trades in our little space......showering in money indeed......my god...!
 
Does anyone want to add a little clarity, and work out the relative contribution of decreased imports and increased exports, to TOT? better include gold sales....
 
The trade surplus come as no surprise as In April Iron ore price reset, 2 years ago we had surplus too starting from April, last year we had a drop starting from April, this year another surplus, the differece this time is that contract are only valid for 3 months and iron ore like copper and other commodity dropped over 25% since april (and volome sold down). Was good that we had record car sales last month when the AU$ was very high, as likely car prices like other things are not going to drop in price like commodity.
Anyway, I'll expect good trading number for may and june as well, the one of April I was expecting to be much higher (the one we had was pretty much what market expected as the AU$ hardly moved). The current account would still be negative (as we pay interests to foreign investments) and Australia need much bigger positive trade number to bring the net foreign debt down
 
Despite the trade surplus, what's the chance we have a Current Account Surplus.

THe current account data come out every quarter and the last one for the 1st quarter was out last monday at a quite big negative number of -16.6 bil$ (-18.5 bil$ the quarter before that). Chances to have a positive account are zero. Australia didn't have one single positive quarter in the last 20 years! The best one since 2002 was the first quarter of 2009 where we still had high iron ore price and australia was running down inventories (current account at -6.3 bil$). doesn't matter too much about the account if GDP grow much higher then that, if GDP gets toppy and not much room to grow it further then is very important to run down negative account number (PIGS are doing that right now)
Anyway, to go back on my previous post, last year in march trade was 2.5 bil$ positive, april was 0.1 bil$ negative (iron ore price set much lower), in 2008 march trade number -2.7 bil$ april trade number -1bil$ (iron ore increase)
 
TOT would be relevant, except all the extra cash goes to big mining company shareholders and execs. Most of which are overseas based. Actual workers don't mostly don't get paid 25% more because iron ore prices rose 25%.
 
here you go,
View attachment current account comparison.XLS
I thought NZ and Iceland where the worse but Australia is a good match.
Well Portugal and Greece had pretty bad numbers but the data is not going backto 1990 like For most country. Spain and USA like AUS and NZ are the main one that has all the way negative data (but at least USA and Spain got several times close to zero), Australia only got once better then -2%GDP and twice better then -3%. This is while NZ never got better then -2.5%. The main country that got positive all the way for 20 years are Switzerland and Japan.
Last night AK was pointing out the difference of exchange rate between the Canadian$ and the A$ and how in the chrisis the C$ was doing better, well, the current account record explain it all
 
Boz, the interesting trend on the chart is the spread of CA/GDPs is widening.

Considering global CAD must equal global CAS, a dollar plot of both would be interesting. It'd show more clearly the big supporters and supportees.

In Australia's case, in addition to having our lifestyles vendor financed, we are selling our means of production and resources.

Was out of town on Monday when the 1st qtr CA data was released.
 
Boz, the interesting trend on the chart is the spread of CA/GDPs is widening.

Considering global CAD must equal global CAS, a dollar plot of both would be interesting. It'd show more clearly the big supporters and supportees.

In Australia's case, in addition to having our lifestyles vendor financed, we are selling our means of production and resources.

Was out of town on Monday when the 1st qtr CA data was released.
The oecd account has been negative as I presume most of non OECD countries do a lot of export like in mining and oil.
If you want to play with charts I attach also the trade data (which I believe it is more meaningful as with account data you get lots of short term factor like exchange rate and investment in productivity and new mines...)
View attachment trade comparison.XLS
 
If you want to play with charts I attach also the trade data (which I believe it is more meaningful as with account data you get lots of short term factor like exchange rate and investment in productivity and new mines...)
View attachment 6192

I reckon you can't ignore the income account so readily Boz.
A country's trade balances don't tell you who owns a nation's means of production, nor how much of the profits stay onshore.

Consider BHP. It's revenues constitute almost 4% of Australian GDP, but its 40% foreign owned. Rio Tinto is 70% foreign owned. The resources sector comprises 18% of Aussie GDP all up, and I'd hazard a guess foreign ownership is above 40%.

Am out for the rest of the arvo.
 
I reckon you can't ignore the income account so readily Boz.
A country's trade balances don't tell you who owns a nation's means of production, nor how much of the profits stay onshore.

Consider BHP. It's revenues constitute almost 4% of Australian GDP, but its 40% foreign owned. Rio Tinto is 70% foreign owned. The resources sector comprises 18% of Aussie GDP all up, and I'd hazard a guess foreign ownership is above 40%.

Am out for the rest of the arvo.

yes, but also a drop in the AU$ would effect the income account and even on how much debt is in AU$ or US$ effect the income account, gdp growth and population numbers effect the income account. But in the long term the trade numbers are the one that form the net foreign debt and the current account, in the long term you need positive trade numbers to get the foreign debt in place. In australia's case probably just 50 bil$ a year goes out of the country (or reinvested in Australia) from foreign investors, so, probably 3-4% of gdp just goes away out of the country. So probably if you have zero GDP growth you probably need around 4 bil$ a month trade surplus to balance the foreign debt, this is also the problem facing now Greece, Portugal and Spain with their big eternal debt
 
Was good that we had record car sales last month when the AU$ was very high, as likely car prices like other things are not going to drop in price like commodity.

I think a lot of this was the storms in Perth that wrote off much of the fleet here. it looks like positive economi news but in fact i think it was just a loss of australian property
 
From this list,

http://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance

Australia has one of the worst current account balances. We are right there with all the PIIGS and the US and the Poms.


Country CAB (billion US dollars) % of GDP
The positives....


1 People's Republic of China 283.756
2 Germany 160.627
3 Japan 141.656
4 Saudi Arabia 95.762
5 Russia 76.163
7 Norway 59.983
12 Sweden 38.797
16 Switzerland 28.776
22 Canada 12.726


The negatives.....

168 New Zealand -10.557
169 India -15.494
170 Poland -15.905
171 South Africa -20.557
172 Portugal -21.987
173 Romania -23.234
174 France -30.588
175 Turkey -37.684
176 Greece -44.218
177 Italy -52.725
178 Australia -56.342
179 United Kingdom -105.224
180 Spain -145.141
181 United States -417.999


So why is Australia so highly regarded in the economy stakes? Obviously this is not the whole story. Japan for example has been running nice surpluses, and at the same time dipping into government debt. Japans surplus has come at a big cost to the government. Australia has little government debt so far, but then another term with Kev might see that off?

The RSPT could see our CUB go through the roof if mining activity slows and money moves from the productive west and north to the consuming south east.


What do people make of these figures? Surely we are a very risky economy? If mining crashed we couldn't even make anything anymore?


See ya's.
 
What do people make of these figures? Surely we are a very risky economy? If mining crashed we couldn't even make anything anymore?

See ya's.

I don't think many people understand the National Accounts TC, even MBAs.

The two major inputs to a country's cash flow (current account) with the rest of the world are its trade balance and the primary account, the latter being a mysterious abstraction to most.

Nor are the pitfalls of gauging a country's cash flow as a % of gdp well understood. As I mentioned elsewhere. Australia's GDP is around 70% services and 18% resources. And possibly as much as 50% of the Australian resource industry (depending on stock market sentiment) is foreign owned, ergo 50% profit is siphoned overseas.

A trade surplus means much less when the profits of that surplus are foreign owned.

But that's ok.....Aussies have something better to invest their money in than resources......resi property..... It's just that we need to borrow 25% of the capital from foreigners to do so. Hence our growing net foreign debt.

But "not a problem" according to the RBA. They're siding with the Pitchford Hypothesis, which states a modern country like Australia can sustain healthy CADs forever, well for as long as foreigners want to finance the deficit.

For an interesting view of national Current Accounts, have a look at the chart here. It shows a disturbing trend of some countries going ever deeper into deficit and others ever higher into surplus. Australia's trend line is slowly moving down, which means our foreign borrowing and selling off of public assets and mining companies to foreigners, is rising.

Australia, in effect, is living off equity, with negative cash flow.
 
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From this list,

http://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance

Australia has one of the worst current account balances. We are right there with all the PIIGS and the US and the Poms.


Country CAB (billion US dollars) % of GDP
The positives....


1 People's Republic of China 283.756
2 Germany 160.627
3 Japan 141.656
4 Saudi Arabia 95.762
5 Russia 76.163
7 Norway 59.983
12 Sweden 38.797
16 Switzerland 28.776
22 Canada 12.726


The negatives.....

168 New Zealand -10.557
169 India -15.494
170 Poland -15.905
171 South Africa -20.557
172 Portugal -21.987
173 Romania -23.234
174 France -30.588
175 Turkey -37.684
176 Greece -44.218
177 Italy -52.725
178 Australia -56.342
179 United Kingdom -105.224
180 Spain -145.141
181 United States -417.999


So why is Australia so highly regarded in the economy stakes? Obviously this is not the whole story. Japan for example has been running nice surpluses, and at the same time dipping into government debt. Japans surplus has come at a big cost to the government. Australia has little government debt so far, but then another term with Kev might see that off?

The RSPT could see our CUB go through the roof if mining activity slows and money moves from the productive west and north to the consuming south east.


What do people make of these figures? Surely we are a very risky economy? If mining crashed we couldn't even make anything anymore?


See ya's.

It is better to measure the current account deficit comparing it to GDP, for example NZ was much worse then Australia for the last few years. Also it is better to look at not just last data as account depends a lot of temporary factors, for example high commodity prices effect positively Australia or Canada while cheap commmodity (specially oil) effect positively PIGS. For example UK and Italy at the bottom of the list are not to worrie about the account deficit, and even USA that has an economy 10 times bigger then australia is better positioned in relation to gdp
 
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