Trade surplus continues to boom as iron ore exports climb again

Another solid month for iron ore exporters is set to provide some cushion to the expected collapse in GDP over the June quarter.

Iron ore exports have bolstered Australia’s external trade position through the pandemic. Picture: Bloomberg

Iron ore exports drove another booming trade surplus of $8.2bn in June, with trade set to provide some cushion to the expected collapse in GDP over the June quarter.

The monthly surplus was up from a downwardly revised $7.3bn in May, according to the seasonally adjusted figures from the Australian Bureau of Statistics.

Exports lifted by $1.2bn, or 3 per cent, in the month, to $36.2bn, while imports rose by 1 per cent to under $28bn – a modest lift after a string of sharp declines.

International sales of non-rural goods was up 1 per cent to $23.8bn, with a $941m, or 9 per cent lift, in metal ores and minerals to $11.8bn. Coal exports fell 12 per cent, or $456m, to $3.4bn.

The ABS reported that the preliminary trade balance for the June quarter, using national accounts treatment, was a record surplus of $24.1bn, up $5bn from $19bn in the March quarter.

AMP Capital chief economist Shane Oliver said net exports look to have contributed around 1 percentage point to national economic growth in the June quarter, although Mr Oliver said he still expected GDP to contract in the order of 7-8 per cent over the three months.

Australia’s trade surplus has surged this year: from $4.9bn for the month of December. The biggest impetus has been the net services position, which swung from a small deficit of -$0.1bn, to the largest services surplus on record, at $2.5bn in June, Westpac senior economist Andrew Hanlan said.

The closure of international borders amid the pandemic has sent services imports crashing 56 per cent from December – a difference of $4.9bn – as Australians were unable to travel overseas. Services exports – including arriving tourists and international students – fell by a less severe 26 per cent, or $2.3bn.

Mr Hanlan noted that some foreign students have remained in Australia through the pandemic, and their spending has provided some support to export earnings.

In terms of goods trade, the 10.5 per cent slump in imports since December has outmatched the 6.7 per cent drop in goods exports, partly explained by still solid demand for our minerals exports, bolstered by the soaring price of iron ore.