Australia’s trade surplus with the rest of the world shrank by just over $9 billion in the December quarter, driven by a drop in iron ore exports.
The Australian Bureau of Statistics said the current account deficit declined $9.3 billion to $12.7 billion in the final three months of last year.
“The decrease in the current account surplus was driven by weaker exports of non-rural goods, while imports of intermediate goods rose,” ABS head of international statistics Andrew Tomadini said.
“Supply chain disruptions, shipping constraints and a sharp increase in freight costs continued to impact trade this quarter.”
Exports of metal ores and minerals fell 28 per cent, as key import markets cut production.
A 39 per cent increase in coal exports helped partially offset this decline, as did rises in fuel and grain exports.
Imported fuels and lubricants rose 16 per cent, coinciding with easing travel restrictions and an increase in domestic travel.
The data feeds into Wednesday’s national accounts, which is expected to show the economy grew by around three per cent in the December quarter, rebounding from the 1.9 per cent contraction three months earlier.
However, more up to figures showed confidence among Australians soured in the past week against the backdrop of war, floods and rising COVID-19 cases in the closed-border state of Western Australia.
The weekly ANZ-Roy Morgan consumer confidence index dropped 2.6 per cent to 99.2 points, while inflation expectations surged to a new seven-year high of 5.3 per cent as petrol prices hit further record highs.
“Most of the decline took place during the latter part of the week as daily COVID cases breached 1000 in WA, massive storms battered the east coast and the invasion of Ukraine began,” ANZ head of Australian economics David Plank said on Tuesday.
The 0.2 percentage point rise in consumer inflation expectations came as Australian Institute of Petroleum figures showed the national average for petrol prices struck another record high in the past week, rising a further 1.5 cents to 180.6 cents per litre.
This came in a week when global crude oil prices topped $US100 a barrel after Russia’s invasion of Ukraine, suggesting Australian petrol prices will rise further.
The Reserve Bank of Australia will hold its monthly board meeting on Tuesday under the cloud of uncertainty caused by escalating hostilities in eastern Europe.
While inflation is set to accelerate, and the unemployment rate remained at a 13-year low of 4.2 per cent in January – despite the impact of the Omicron variant – economists expect the RBA to leave the cash rate at a record low 0.1 per cent for some months yet.
Last week’s economic data showed wages growth remained well short of the three per cent-plus level the RBA is looking for before lifting interest rates.
Meanwhile, Australia’s manufacturing sector is growing again after the disruptions caused by the COVID-19 Omicron outbreak, and strong new orders suggest there is further expansion ahead.
The Australian Industry Group performance of manufacturing index rose by 4.8 points in February to 53.2 after a sharp decline in the December 2021-January 2022 period when Omicron was at its harshest.
An index reading above 50 points suggests the sector is expanding.
“Australia’s manufacturing sector edged back into expansion during February following the sharp labour and supply chain disruptions of the December-January period,” Ai Group chief executive Innes Willox said.
“Encouragingly, new orders were very strong and point to further strength over coming months.”
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)