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Iron Ore, Coal Boosting Australia Economy

Iron Ore, Coal Boosting Australia EconomyIron Ore, Coal Boosting Australia Economy

Australia’s economy is likely to stay upbeat after the country on Friday reported a surprise A$1.243 billion ($912 billion) trade surplus in November—the first in almost three years—as bulk commodity exports beat the market forecast of A$500 million deficit seen by analysts polled by Reuters.

Boosting the economy was a sustained rally in iron ore and coal prices, which surged in 2016 due to demand from China after it cut excess capacity and on expectations from US president-elect Donald Trump’s massive fiscal stimulus plan, CNBC reported.

According to the Australian Bureau of Statistics, exports jumped 8% from a month ago to A$30 billion that sent figures bucking analysts’ expectations. Imports were unchanged from October.

Broker CommSec Equities’ analyst Savanth Sebastian said he expected surprise surpluses to continue for the next few months on support from commodities and weakness in the Australian dollar relative to the greenback.

Other than strong iron ore and coal prices, there will also be a lift in exports from mid to late 2017 as mega liquefied natural gas projects come online, he said.

“The outlook is relatively upbeat in the medium-term for the Australian economy,” Sebastian said.

The services industry was doing well too, with robust tourism figures supporting overall trade numbers, he added. Government figures showed tourism-related services credits rose A$24 million or 1% to A$4.05 billion from October.

This will likely lead to positive fourth quarter GDP numbers after the “anomaly” of a 0.5% contraction in the third quarter, he said. The country will also likely miss a technical recession, which is typically defined as two quarters of quarterly contraction.

While the stronger dollar will weigh on commodities, which is traded internationally in the greenback, a weaker Australian dollar will also help with exports from Down Under in general.

 

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