Daily Commentary BY THE CURVE TEAM –

Trade Balance Surges

8th of May, 2020

Australia’s trade balanced ballooned to finish the quarter, posting a new record.

After starting the quarter a little softer, Australia’s trade surplus roared back, hitting a new high of $10.5bln. The number in itself doesn’t tell the whole story. Exports over the month jumped by a massive 15%, driven by bulk commodities and non-monetary gold exports. Meanwhile imports fell 4%, largely driven by a fall in services.

Despite the surge in March, the trade balance for the quarter wasn’t largely changed from Q4 2019. As a result, the impact on the final growth figure for Q1 won’t be as big as might have been expected given the magnitude of the rise in March.

Nevertheless, the jump in the trade balance and the surge in retail sales in March should help offset some of the weakness elsewhere when it comes to the final GDP outcome in Q1. However, that is largely historic now and will fade from memory quickly when the collapse in growth in the second quarter is finally made clear.

We will get a far better gauge of the outlook, or at least what the RBA is thinking when they release their quarterly statement on monetary policy later today. They will give us more detail on their central scenario which they spoke about after Tuesday’s board meeting. They will also release a range of scenario’s given the heightening level of uncertainty around the outlook at present.

David Flanagan

Director - Interest Rate Markets