Daily Commentary BY THE CURVE TEAM –

Trade Surplus Slumps

8th of December, 2017

Yesterday saw another disappointing domestic data release with Australia’s trade surplus all but disappearing. There were a number of drivers behind the $1.5bn fall which weren’t all bad news.

Australia’s trade surplus fell from a revised $1.6bln in September to a meagre $105m in October, continuing the trend seen in the national accounts released the previous day. Net exports failed to add anything to growth in the third quarter and if the trend continues, it is unlikely they will help boost growth in the current quarter.

The fall in the trade surplus was result of both a fall in exports and a rise in imports.

Exports were down 2.8% over the month, largely on the back of lower commodity exports and lower prices. This may be reversed somewhat thanks to rising prices over the past month.

Imports on the other had were somewhat more positive. While have the increase was down to fuel imports, the other half was a positive sign that the increase in investment see in the national accounts has continued into the fourth quarter. This is probably the biggest positive from a largely negative release.

The domestic data releases continue this morning with the latest monthly lending statistics. The market is expecting a further pullback in new lending as the Council of Financial Regulators attempt to reduce risks in the mortgage market continue to bite. Tonight the key release will be the nonfarm payrolls report in the US.

David Flanagan

Director - Interest Rate Markets