Australia demonstrated its capacity to escape the worst of the global downturn on Thursday, reporting its largest monthly trade surplus in more than a decade and its second largest ever with the help of a surge in mining exports.
Exports rose 6 per cent to A$24.6bn ($19bn, £11bn, €14bn) in August, with coal exports rising 26 per cent, iron ore 5 per cent and rural goods 4 per cent. Tom Albanese, chief executive of Rio Tinto, the mining group, was upbeat on Thursday about continuing strong demand from China for minerals.
“Constrained supply conditions and firm demand from China and other developing countries should establish the basis for higher than average [exchange-traded commodity] prices through 2009,” Mr Albanese told a Melbourne Mining Club luncheon.
However, he warned of two short-term “countervailing influences”. The financial crisis had led to greater commodity price volatility, especially in US dollar prices, and there had been “modest but clearly discernable deceleration” in Chinese growth, which would fall to about 9 per cent next year.
The competitiveness of Australian exports benefited from a fall in the currency, with the nation’s dollar falling to 79 cents against its US counterpart this week after near parity in July.
Australia’s A$1.4bn trade surplus in August was a A$2.1bn turnround when measured against the country’s A$700m July deficit.
“Exports are taking off,” said John Peters, economist at the Commonwealth Bank of Australia, noting that the export figures for the rest of the year will benefit from high price increases won by mining companies in annual negotiations with buyers.
Imports fell 2 per cent to A$23.8bn during August reflecting a 25 per cent drop in imports of fuels and lubricants, and a 1 per cent fall in consumer goods imports.
Australia will shortly begin its 17th year of uninterrupted growth as its economy managed to withstand the collapse of the technology bubble and the Asia financial crisis.
Although its share market has fallen heavily as the credit crisis unfolded over the past year, the country’s four largest banks are among the fewer than two dozen in global finance that retain a double-A rating.
As well as improved prices for mining commodities, Australia stands to benefit from greater volumes after spending billions on rail, road and port infrastructure. Mr Peters said that Asia and Middle East now account for about 80 per cent of Australia’s exports, with the US making up about 10 per cent.
“We estimate increased export income will kick A$50bn into the Australian economy [in the year to next June],” Mr Peters said. “We will be in trouble if China and India tank, but government is running massive budget surpluses, spending A$150bn on infrastructure over four years, and the Reserve Bank has scope to drop [interest] rates.”