Australia-Facing the recession.

AUSTRALIA-Exports of resources resilient in the face of global recession

SYDNEY: Australia’s trade surplus more than doubled in February as exports of resources remained surprisingly resilient in the face of global recession, while imports were curbed by sagging demand at home.

The unexpectedly strong result helped lift the Australian dollar above 70 US cents and stood in stark contrast to many of Australia’s trade partners where exports were tumbling.

"It’s a resilient performance," said Brian Redican, a senior economist at Macquarie. "The basic stuff that Australia exports is perhaps not as vulnerable as the sort of discretionary goods like cars and computers that Japan or (South) Korea produces."

Australia’s surplus on goods and services yawned out to A$2.11bil in (US$1.5bil) in February, up from a revised A$926mil the month before.. That was far above forecasts of a A$700mil surplus and the second biggest on record.

Exports rose 4.4% to A$24.93bil, though that was flattered somewhat by a A$784mil jump in non-monetary gold which is brought into the country for processing before being re-exported. Still, farm exports like wheat and meat enjoyed a 6% rise, sales of metal ores rose 3% and coal held steady.

From a year earlier exports were up by no less than 34%, a solid performance considering trading partners like Japan saw exports dive 49% in February, while China’s dropped 26%.

However, that strength owes much to huge rises in contract prices for iron ore and coal set in April last year, when commodities were hot.

Global trade has since slumped and analysts suspect iron ore prices could be cut by anywhere from 30% to 40% in this year’s contract negotiations.

Since iron ore and coal account for around half of Australia’s exports by value, such a price sacrifice could well tip the country back toward monthly trade deficits.

"The trade news is likely to remain positive into March but when the ’new’ export contract prices come into effect in April, the surpluses will inevitably shrink," said Stephen Koukoulas, global strategist at TD Securities.

On the other side of the trade ledger, imports are receding as Australian consumers decided to spend less and save more.

Imports overall eased 0.6% in February to A$22.82bil, the lowest in almost a year and down 10% from a record high hit back in November. — Reuters