Australia’s July trade surplus widens to record high

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 Australia’s July trade surplus widens to record high
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Highlights

  • Australia’s trade surplus ballooned to a record high of AU$12.1 billion in July 2021.
  • Australia’s exports to China also hit a record high of AU$19.4 billion, reflecting stronger trade relations with China.
  • The country recorded an economic growth of 0.7% in the June 2021 quarter.

Australia's trade surplus ballooned to a record high in July 2021 as the country’s exports of coal, iron ore and liquefied natural gas all have seen a sharp surge. According to the Australian Bureau of Statistics (ABS), trade surplus rose to AU$12.1 billion (approximately US$8.91 billion) in July 2021, comfortably surpassing the expectations of AU$10.2 billion.

The country’s exports were up 5% as Asian demand for LNG and thermal coal climbed, coupled with higher iron ore prices. The rise in exports was partly driven by a 7% jump in non-rural goods, notably through strong demand for iron ore from China. Imports also climbed 3%, primarily due to a sharp increase in parts and accessories for telecommunications equipment.

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Australia’s trade relations with China strengthened as exports to China also hit a record high of AU$19.4 billion, up by a massive 72% from July last year when the COVID-19 induced pandemic restrictions were putting a halt on the global trade flows.

The housing finance data for July 2021 was also released by the ABS on 2 September 2021. Home lending in July climbed 0.2%, primarily driven by an increase in loans to investors, which were notably up 1.8% to a huge 98.7% this year. However, loans to owner-occupiers were down 0.4%, but were still up 58.3% in 2021. Loans for the first-time homebuyers also fell 6.8% following a 7.8% fall in June 2021 and a 20% drop since January 2021.

Katherine Keenan, ABS head of finance and wealth, said “Investor loan commitments have seen an unbroken period of growth since October 2020. First home buyer lending fell across all states and territories, with the largest fall seen in Victoria, followed by Queensland and New South Wales."

On 1 September 2021, the country also released it Q2 GDP number, revealing that the economy grew by 0.7% in the June 2021 quarter, slower than the revised expectation of 1.9% growth in the March 2021 quarter. However, the GDP growth was still stronger than market expectations.

Bottom line

Australia’s economy is on a strong path to recovery, recording record trade surplus of AU$12.1 billion in July 2021. A higher trade surplus is good for the economic growth and can generate employment. Despite the GDP numbers being solid, the economy is still expected to contract in the September 2021 quarter, primarily due to COVID-19 lockdowns in NSW and Victoria.

Related article: ANZ anticipates Australian housing prices to increase further in 2021

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