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Economy in Brief

Large Shipments to China Help Australia Trade Balance
by Carol Stone February 3, 2006

International trade for Australia looks to be very dynamic process. The trade balance widened to a significant deficit in 2003 and 2004, but moderated considerably in 2005, mirroring a pattern of decline and then rapid turnaround in exports. Exports fell 9.3% in 2003, but recovered almost exactly that amount in 2004. Then last year, they surged ahead 17.8% for the year as a whole, with 9.0% in the month of December alone over November. Exports in December, as seen in the table below, grew a whopping 28.5% from December 2004.

At the same time, imports have not been sluggish, as they were up 10% for 2005 as a whole. As elsewhere, some of this was oil-price related, with imports of mineral fuels, lubricants and related up 34% for the year, following 28% in 2004. Chemicals also rose by more than 10%. Other manufactured goods weren't that strong, but they gained in a range of 8%-9%, so they were hardly weak.

The two most interesting developments in Australian trade -- at least in our view -- concern metals exports and exports to China. These may be related, but available data can't confirm that. The third graph is very suggestive, however. Exports to China rose 45.5% in 2005, with a final spurt in December carrying them to A$1.8 billion, up nearly 66% from December 2004. (For comparison, shipments to the US, which were larger than those to China as recently as 2003, were relatively flat at about A$800 million/month from then until late last year.) Among kinds of goods Australia has exported, non-food crude materials also increased substantially, 29% for the year and 49% December-on-December. Over the past five years, the monthly pattern of the year-to-year changes in these raw materials has a 76% correlation with growth in exports to China. Australia is a major producer of copper and aluminum; it may well be that they are shipping considerable quantities of those metals to their large neighbor to the north. This would bode well for both countries, a fine illustration of the "gains from trade", and would help minimize Australia's trade deficit with China.

Month/MonthMonthly Average
Australia Trade (Mil.A$) Yr/Yr
Dec 2005* Nov 2005* Oct 2005* Dec 2004* 2005 2004 2003
Goods & Services: Balance -1168 -2473 -1371 -2480 -1668 -2102 -1818
Goods: Exports 13214 12129 11999 10229 11619 9848 9067
  % Change 9.0 1.1 3.8 28.5** 17.8 9.4 -9.3
Goods: Imports 14150 14227 13285 12502 13163 11875 10974
  % Change -1.9 8.6 1.1 9.3** 10.1 8.7 1.7
China: Exports (NSA) 1827 1419 1509 1102 1336 918 757
USA: Exports (NSA) 914 840 773 835 772 796 788
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