Daily Commentary BY THE CURVE TEAM –

Trade Balance Surprise

4th of December, 2020

Trade balance data for October delivered an unexpected result.

Q3 data showed a fall in exports and rise in imports as domestic consumption recovered, international borders remained closed and overseas demand lagged. Given all these factors remained relevant in October, a simultaneous rise in imports and exports of 3.5% was expected.

Instead, exports rose 5.4% and imports rose a modest 0.6%, which took the trade balance to $7.5 billion from $5.8 billion. This was off the back of a rising metal ore prices.

Imports slowing is more of a puzzle. It would be expected that as domestic consumption recovers and the Australian dollar continues to strengthen that import values will increase, especially considering they remain over 10% lower than this time last year.

Housing approvals were once again on the rise in October. They were up 0.7% for the month with owner occupiers leading the rise with a 0.7% fall.

It leaves overall approvals up 23.3% for the year and owner occupier approvals up 31.2% for the year. Approvals were expected to rise even further this month, but Victoria was worse than expected. Victoria poses an upside for approvals over the coming months.

The approvals data is in contrast with overall credit growth. It appears they are at odds, but slow credit growth is off the back of business credit growth lagging. Housing credit growth and approvals have been in sync.

Josh Stewart

Associate - Money Markets