Trade deficit widens in August

3 Oct 2012, 12:12 pm   -   Source: AAP

Economists say the weaker export data for August is not surprising, given the falling prices for bulk commodities during the period.

Weak export data confirms concerns about commodity prices and justifies the Reserve Bank of Australia's (RBA) latest interest rate cut, economists say.

Official figures released on Wednesday showed Australia's trade deficit widened in August, with the balance on goods and services at a deficit of $2.027 billion (seasonally adjusted), compared with a revised deficit of $1.53 billion in July.

During August, exports fell three per cent, while imports dropped one per cent, the Australian Bureau of Statistics (ABS) said.

HSBC chief economist Paul Bloxham said the data confirmed concerns about the price of bulk commodities, such as coal and iron ore, and their impact on Australian trade.

"I'm not surprised that we saw a fall in exports because part of that story is falling prices of bulk commodities," he said.

"We knew that that was happening in August."

Mr Bloxham said the result indicated a slowdown in Chinese growth and demand.

He said the value of exports would probably remain weak during the next few months, before stabilising.

He added that concerns about commodity price weakness would have been one reason behind the RBA's decision to cut the cash rate to 3.25 per cent on Tuesday.

National Australia Bank senior economist Spiros Papadopoulos said economists had expected a wider trade deficit in light of falling iron ore and coal prices.

"With commodity prices easing off in July and August we had to expect that the trade deficit would deteriorate," he said.

However, he said the August result was much weaker than expected to due in part to a sharp revision in July's trade deficit.

Mr Papadopoulos said the weaker export figures would be a concern for the RBA.

"Obviously ongoing falls in commodity prices are one of the factors the RBA is trying to offset with its interest rate cuts in terms of the impact on the economy."

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