Key Points
Australia's trade surplus decreased slightly in August, driven by moderately stronger import than export growth. This remains a historical anomaly driven by strong goods export growth in recent years, with import growth lagging.
Goods imports growth was driven by consumption rather than investment, while goods exports continued to be underwritten by the commodities price boom, restrained possibly by a downturn in global construction.
Intermediate goods and merchandise imports have regained their dominant share of Australian goods imports, probably due to the construction boom and supply chain disruptions.
The mining sector continues to dominate Australian goods exports, though changes in commodity prices have shifted the balance from iron ore to coal and gas, possibly explaining the relative exuberance in Queensland over West Australia.
International Trade in Goods and Services: what it is, why it matters
Australia is what economists call a “small, open economy” as opposed to a “large, (effectively) closed economy”. What that means is that we do a lot of trade with the rest of the world, and a lot of our wealth is created by trade compared with massive nations like the United States or China. The monthly International Trade in Goods and Services dataset provides us with a rich account of this.
The key number in this dataset is the trade balance, which is arguably the key driving factor within the balance of payments. The balance of payments is a summary of all payments across Australia’s international borders, categorised into “current” and “capital” (or roughly what accountants would call “non-current”) transactions. The trade balance, within the current account, is also known as net exports, which is a key component of the GDP-E number within the national accounts.
In a follow-up, we will focus on a separate set of numbers – merchandise exports – which are compiled on a “Free On Board” basis and broken down by State of origin and country of destination. From this, we will get a rich view of the sources, destinations, and price at point of transfer for exports leaving ports (air and sea) across the Federation for the rest of the world that rounds out our analysis of the trade balance, which is compiled only at a national level in this dataset.
As always, we begin with the headline numbers: breaking down the trade balance into goods exports/imports and services exports/imports to see what’s driving it. Then, because we can, we look a little deeper into the contributions and contributions of Goods Trade in particular, where we have particularly interesting and granular data on what’s driving our trade balance.
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