Australian trade surplus soars in 2011

Australia Bakes In The Sunshine Of Success!

At a time when the worldwide economy is most certainly under pressure it seems extraordinary to report that the Australian trade surplus hit a record AU$19.3 billion in the 12 months to December 2011. This is an absolutely amazing performance by the Australian economy which, despite the worldwide economic outlook, continues to go from strength to strength. So what is pushing the Australian economy to new levels?

Chinese takeaway

It is becoming more and more apparent that shipments of coal and iron ore to China and India in particular are having a major impact upon the country’s trading situation. This has sent the Australian currency to a five month high against the US dollar and the government sees no reason why this ongoing situation will change in the short term.

It has been evident for some time that expansion in the Far East and India in particular has given great support to commodity prices across the world. As we have mentioned on numerous occasions, Australia is very rich in natural resources such as iron ore, coal, etc. Therefore, while not wholly unexpected to see significant demand for these natural resources you have to take your hat off to the Australian authorities who have positioned the country to take maximum advantage of the situation.

Can the trade surplus continue?

It was interesting to see that the trade surplus for December 2011 came in at AU$1.71 billion, against a revised figure of AU$1.34 billion in November, compared to analyst expectations for December of around AU$1.2 billion. The very fact that the trade surplus would appear on the surface to be getting stronger has given many investors food for thought in these very difficult economic times. Whether or not the authorities can continue to milk the situation until the worldwide economy recovers, and then hopefully joining the worldwide economic pickup, is certainly a very interesting question and so far you have to say that the authorities have played their cards to their maximum potential.

Investors seem to be rushing into Australian dollars as some kind of safe haven in these very troubled times which will be well received by the authorities. So far there seems to be no major letup on expansion plans by the likes of China and India and with natural resources in the area now more scarce than ever this is certainly playing into the hands of the Australian authorities and the Australian mining companies in particular.

How will the Australian Central Bank respond?

Many people had been expecting the Australian Central Bank to reduce interest rates at its next meeting but with these exceptional trade surplus figures now in the public domain there is some debate as to whether this will happen. What would be the rush in reducing interest rates when the trade surplus appears to be fairly strong? Leaving rates as they are would potentially give the Central Bank more room for manoeuvre if the ongoing worldwide economic situation was to continue for a sustained period of time.

Even though a slight majority of traders still expect a quarter percent base rate cut on February 7 it will certainly be a very close call and the movement in the currency would suggest that we may be tipping towards a potential “unchanged” position.

Is it party time in Australia?

It would be very easy for the Australian authorities to get carried away with these very eye-catching trade surplus figures but in reality there is still much work to be done to protect the overall Australian economy and the employment market. However, this exceptional demand from overseas customers (in the shape of China and India) will certainly offer some protection to the mining industry and other natural resource sectors.

It is also hoped that the relative protection afforded to the natural resources sector in these relative boom times will move down the economic chain and assist those in closely connected sectors and the economy in general. The opportunity to “take your foot off the gas” is a real one for the Australian government but they are also well aware that there is a need to push the economy further while also looking to introduce austerity measures where applicable.

Why are expats still moving to the warm climate and strong economy of Australia?

Well, in many ways we have answered the question in the question because there is no doubt that the relative strength in the Australian economy, compared to the vast majority around the world, has put the country in an exceptionally strong position in the expat market. It is no surprise to see that more and more people are still looking to Australia as their potential home for the future. Where else in the world could you move at this moment in time to experience relative economic boom times?

These trade figures would be classed as exceptional in any economic environment but they are absolutely amazing in the current situation.

Boom, Boom

The ongoing boom in natural resources, and the likelihood this will remain relatively strong for some time to come, has certainly placed something of a floor under the Australian economy. It has also given economists some food for thought with regards to ongoing growth in the region and the fact that it is highly unlikely that Australia will experience a recession in the foreseeable future. Indeed, the country has managed to escape any severe recession or economic downturn over the last 20 years!

Conclusion

The trade surplus announced by the Australian authorities took many people by surprise and even caught many of the most optimistic economist off-guard. While there is no doubt that the vast majority of the surplus has been created by demand from China and India, for various natural resources, there is also no doubt that the Australian government has been very supportive of this particular industry and placed the country as a whole in a very advantageous position.

Therefore, it is no surprise to see that expats are still looking to move to Australia to set up their new homes and their new lives. Is there any where in the world at the moment with better prospects than Australia?

Australian trade surplus soars in 2011

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