Australia registers trade deficit in May

The global recession and falling commodity prices are hurting Australian exports,
but they may yet help to underpin economic growth because imports are even more
fragile, economists say.
Exports dropped a further five per cent in international trade data for May,
released on Thursday, pushing Australia's trade position into a second consecutive
monthly deficit.
"While it is disappointing to see the value of exports falling, it is an inevitable
consequence of the rapid slowdown in the economies of our major trading partners and
the large falls in commodity prices that have occurred," Acting Trade Minister
Senator Kim Carr said.
The value of coal exports fell by 15 per cent in May as large reductions in coal
prices negotiated by Australian miners for the new Japanese financial year came into
effect.
Exports of goods to Japan fell 13 per cent in May, but exports to China continued to
grow, up nine per cent.
The trade balance of goods and services in May was a seasonally adjusted $556
million deficit after a downwardly revised $282 million shortfall in April, the
Australian Bureau of Statistics said.
Economists' forecasts had centred on a $125 million deficit for May.
Two months of deficits come after eight straight months of surpluses.
Still, Senator Carr said he was pleased to see that resource export volumes held up
well, with "high-rank" metallurgical coal exports up 17 per cent and semi-soft
coking coal rising six per cent.
"The value of metal ore and minerals exports fell by two per cent, a strong result
given the large falls in contract prices for iron ore that have been announced
recently," he said.
JP Morgan economist Helen Kevans said exports had saved Australia from a technical
recession in the March quarter, contributing 2.2 percentage points to growth.
"We believe that net exports will continue to support growth in the near term,
although mainly owing to a slump in imports," Ms Kevans said.
"Weaker imports will be symptomatic of broader weakness in the consumption sector in
the latter six months of the year, with the consumer likely be to particularly
challenged as the impact of the fiscal stimulus fades, petrol prices rise, and
unemployment rises significantly."
Imports fell four per cent in May, led by a 14 per cent drop in capital goods,
reflecting a weak business climate.
"Business investment has ground to a halt and the business recession continues. Get
set for another quarterly round of falling profits, investment, terms of trade later
next month," TD Securities senior strategist Annette Beacher said.
"Be in no doubt that just as the terms of trade boom eventually dragged everyone
along for a prosperous ride, the subsequent downside is yet to be felt in the wider
community."