CANBERRA: Australia’s imports are expected to have reversed the October bounce in November, while exports are likely to have powered ahead. In October, reality defied predictions of a sharp narrowing in the trade deficit as it widened by AUD 269 million. In November too, trade deficit is expected to have declined, noted Societe Generale.
The main argument on the export side continues to be the steep rise in commodity prices in recent months, in particular of iron ore and coal in its various forms that would continue to feed through to export prices that would take time to adjust. However, the larger-than-expected October trade deficit was not actually driven by weak export performance. It was due unexpected solid imports that grew 2.3 percent sequentially. The strength of imports is not expected to have been sustained in November, as it was concentrated in imports of capital goods at a time when overall business investment continues to contract, stated Societe Generale. Thus, imports are likely to have declined strongly, while the deficit is expected to have declined almost AUD 1 billion, added Societe Generale.