Australia's Trade Deficit Narrows As Imports Fall

Australia foreign trade 010714

Australia's external trade in goods and services resulted in a smaller-than-expected deficit in November amid a decline in imports, a report from the Australian Bureau of Statistics revealed Tuesday.

The country's trade in goods and services showed a deficit of A$118 million in November, less than a revised A$358 million deficit in October and A$300 million shortfall expected. The deficit has now fallen for four consecutive months.

The value of imports dropped 1 percent month-on-month in seasonally adjusted terms to A$27.49 billion in November. Exports remained almost steady at A$27.38 billion.

The currency backdrop has been a clear tailwind to export revenues in the second half of 2013 relative to the first half, with exchange rate having fallen close to 15 percent between April and November, Ben Jarman, an economist with J.P. Morgan Australia, said.

Export values of coal and iron ore generally increased from a month earlier, compensating for the lower volumes.

Separate surveys of the country's manufacturing and services industries have recently revealed that the business activity contracted in December as was the case for most part of 2013.

The Reserve Bank of Australia has kept its monetary policy accommodative in view of the subsiding support from mining investment to the real economy. The central bank is looking for further fall in the currency, which, according to it, will foster balanced growth of the economy.

The RBA has reduced the cash rate by a cumulative 225 basis points since November 2011 on the premise that easy policy will support demand in areas outside the resources sector.

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