Daily Commentary BY THE CURVE TEAM –

Bright Spot for Domestic Outlook

9th of January, 2019

As the global outlook continues to soften and trade talks between the US and China stretch on for a third day, we got a positive piece of data for the domestic outlook yesterday.

After a soft run of local data over the past few weeks it was a welcome relief to get some positive news. While the trade balance dipped a little in November from the previous month, it was only due to the growth in imports outpacing exports.

Over the month, exports were up 1.4% with the continued growth in LNG exports outpacing the decline in coal volumes over the month. Despite signs of global growth dipping, demand for Australia’s resources has remained strong so far. It was worth noting that services exports continue to grow and Australia is on track for a services trade surplus in the coming months based on recent trends.

Another positive was the uptick in imports with consumption goods, capital goods and intermediate and other merchandise goods all rising from a month earlier. Let’s hope its due to an increase or an expected increase in demand otherwise we could see a glut in inventories over the months ahead.

The key remains exports as far as the outlook for growth is concerned as they will need to continue to grow from here to have a meaningful impact on GDP. LNG exports should continue to support export growth however softening growth in China could provide a headwind to iron ore and coal exports.

David Flanagan

Director - Interest Rate Markets