Finance Finance News Trade balance in the red

Trade balance in the red

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Weak iron ore and coal prices have kept Australia’s trade balance in the red.

The trade deficit was $1.68 billion in June, following a deficit of $2.04 billion in May, figures from the Australian Bureau of Statistics showed.

June’s trade balance was better than the $2 billion deficit economists were expecting.

Imports fell 1.0 per cent in June and exports were flat, which was better than expected, JP Morgan economist Tom Kennedy said.

“The surprise was on the export front,” he said.

“We think this is more or less a price phenomenon, stemming from exporters marking through the weakness in iron ore and coal prices from earlier in the year.

“Considering how large coal and iron ore are in terms of Australia’s export basket, they’re really the dominant factors driving that headline balance lower.”

Mr Kennedy expects lower iron ore and coal prices earlier this year to continue weighing on the trade balance in coming months.

RBC Capital Markets head of economics Su-Lin Ong said the persistently high Australian dollar was also not helping the trade balance.

“That’s part of the Reserve Bank of Australia’s rhetoric that the currency remains elevated despite movements in commodity prices and that’s what’s driving the deficits at this point in time,” she said.