4 Oct 2012

Blowout in Australian trade deficit

7:06 am on 4 October 2012

Economists in Australia say a blowout in the trade deficit justifies the latest cut in the official interest rate.

Australia's trade deficit has blown out to more than $A2 billion. Figures for the previous two months also downwardly revised.

Bureau of Statistics figures show Australia imported $A2.03 billion worth of goods and services more than exported in August.

The ABC reports that is the worst monthly result since March 2008.

The value of exports fell $A844 million in August, largely due to a fall of 7% in the value of metal ore and mineral exports, led by iron and copper ores. Exports of coal and related products slid 11%.

Most of the fall in export revenue was due to falling prices, with the volume of iron ore and coking coal shipped actually increasing.

UBS Australia chief economist Scott Haslem expects Australia's trade position to deteriorate further this year.

Mr Haslem said lower commodity prices and a high Australian dollar mean the Reserve Bank has more work to do.

In contrast, tourism earnings coming into Australia rose 2%, or $A55 million.

On the import side, demand for consumption goods was up 2%, but imports of fuels and lubricants were down 13%.

The Reserve Bank of Australia lowered its rate on Tuesday to 3.25%.