Australia Trade Surplus Narrows as Coal Exports Fall

Australia’s trade surplus was the narrowest in seven months in October and mortgage lending growth weakened before central bank Governor Glenn Stevens lowered borrowing costs for the first time in 31 months.

Exports outpaced imports by A$1.6 billion ($1.63 billion), from a revised A$2.25 billion surplus in September, a Bureau of Statistics report in Sydney today showed, the weakest since March when shipments were hurt by floods. Separate data showed loans made to build or buy houses and apartments gained 0.7 percent from September, when they rose a revised 1.9 percent.

Australia’s trade surplus may narrow further as the price of iron ore, the nation’s biggest export, declines and global growth slows in response to Europe’s sovereign-debt crisis. The Reserve Bank of Australia last week made its first back-to-back interest-rate cuts since 2009 as weaker commodity prices ease inflation pressure.

“Softer commodity prices are flowing through to lower export receipts, and there’s an underlying softness in the market for housing,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “The two rate cuts are partially justified by the housing data and we should start to see an improvement because of lower rates.”

Currency Reaction

The local currency was little changed after the data, trading at $1.0186 at 12:59 p.m. in Sydney from $1.0192 before the reports.

The trade report showed exports were little changed in October at A$27.3 billion, as a 7 percent gain in mineral fuels offset a 2 percent drop in coal, coke and briquettes, and a 6 percent fall in metals. Imports advanced 2 percent to A$25.7 billion on a 57 percent increase in non-monetary gold and an 11 percent gain in fuels and lubricants, the report showed.

The median estimate in a Bloomberg News survey of 20 economists was for a trade surplus of A$2 billion.

Stevens lowered the overnight cash rate target to 4.25 percent from 4.5 percent on Dec. 6, citing “considerable turbulence” in financial markets and an increased chance of a “further material slowing in global growth.”

Traders are betting Stevens will lower borrowing costs again at the central bank’s next meeting in February, interbank cash-rate futures showed before today’s report.

Value of Loans

Today’s lending report showed the total value of loans fell 2.5 percent to A$20.5 billion in October.

The value of lending to owner-occupiers declined 1.2 percent, the report showed. The value of loans to investors who plan to rent or resell homes dropped 5.5 percent.

Buyers are entering the market in New South Wales, the nation’s most populous state, before the government there ends tax breaks Dec. 31 on purchases of existing homes.

First-home buyers accounted for 17.9 percent of dwellings financed in Australia in October, up from 16.4 percent in September and higher than 15.4 percent a year earlier, today report showed.

The nation’s four biggest banks -- Commonwealth Bank of Australia (CBA), Australia & New Zealand Banking Group Ltd. (ANZ), Westpac Banking Corp. (WBC) and National Australia Bank Ltd. (NAB) -- reduced home- loan rates for customers after both Reserve Bank moves.

China is Australia’s biggest trading partner and its demand for iron ore, coal and energy has driven the nation’s terms of trade, or export prices relative to import prices, to a record.

Separate recent reports showed manufacturing slumped in China and the euro region to the weakest levels in more than two years. A Nov. 30 government report showed India’s economy grew 6.9 percent in the three months through September, the weakest expansion since the second quarter of 2009.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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