Iron ore exports boost trade surplus

An eight per cent rise in the value of mining exports in September has strengthened Australia's trade surplus and is likely to boost economic growth.

A view of the Invincible colliery near Lithgow, NSW

Australia's trade surplus has improved as the value of exports rose in September. (AAP)

Australia's trade surplus has doubled due to a rise in mining exports that is expected to boost economic growth.

The trade surplus rose to $1.75 billion in September, seasonally adjusted, up from $873 million in August and above the $1.2 billion surplus economists had forecast.

Exports climbed three per cent, or by $924 million, driven mainly by an eight per cent increase in the value of mining exports.

Imports were relatively steady, rising by just $52 million in the month.

The better than expected surplus is mostly the result of another large surge in nominal iron ore exports, JP Morgan economist Tom Kennedy said.

"Iron ore shipments values delivered most of the upward impulse, while coal exports were flat and LNG export values drifted lower," he said.

Iron ore and coal are Australia's top two export earners.

Combined with terms of trade data from September, the numbers indicate that net exports will support real gross domestic product growth in the third quarter of 2017, Mr Kennedy added.

Australia's trade balance has been in surplus for much of the past year, helped by a rebound in iron ore prices and rising natural gas exports.

Economists expect the momentum to continue as production from LNG projects continues to ramp up and iron ore prices remain above $US50 a tonne.

In September though, iron ore prices slipped from a peak of $US75 a tonne to around $US62 a tonne, but that has been offset by a continued increase in export volumes to China.

Economists expect the gains from international trade to be tempered in the short run, but there could be a pick-up in 2018.

"Further net trade gains might be harder to achieve in the fourth quarter with the ramp up of LNG production interrupted from scheduled maintenance, coupled with meatier declines in iron ore prices now under the belt," National Australia Bank economics director David de Garis said.

"Looking into next year, a further notable uplift from trade should be evident, mainly from the LNG ramp up. We would also note that the current uplift in the oil prices will in time spill over into LNG prices."

The Australian dollar was boosted by the trade data, immediately gaining one fifth of a US cent to 77.01 US cents, and rising further to be at 77.23 US cents at 1550 AEDT.


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Source: AAP



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