Record trade surplus quells doomsday recession chatter in Oz

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http://www.afr.com/news/economy/trade-surplus-hits-record-351b-20170202-gu3qcq

The biggest surge in coal and iron ore prices in almost seven years has delivered Australia its largest trade surplus on record, injecting a major boost to the federal budget and soothing fears of a technical recession in the fourth quarter.

In a result that significantly beat economists’ expectations and spurred speculation of Reserve Bank of Australia rate hikes later this year, the Australian Bureau of Statistics said on Thursday that the surplus widened in December to $3.51 billion, the most in records dating back to July 1971. The November surplus was revised to $2.04 billion, almost double the initial estimate.

The strong trade result – which most economists expect will have continued in January given still-robust commodity prices and a lack of disruptive cyclones – sent the Australian dollar rocketing to its highest level in almost three months.

The currency hit as much as US76.48¢ after starting on Thursday at around US75.88¢.

Goldman Sachs Australia chief economist Tim Toohey said the probability of a Reserve Bank interest rate hike in November was somewhere in the 40 to 49 per cent range “and rising”. His forecast contrasts sharply with other analysts, including at National Australia Bank, for more cuts.

A ballooning trade sector sharply cuts the risk that Australia suffered a technical recession in the second half of 2016, and helps reduce a significant political threat from the economy for the Turnbull government.

Economists said the latest trade figures imply the trade sector will almost certainly deliver a boost to gross domestic product when fourth-quarter figures are published in early March.

They said this is because volumes are rising alongside prices, though not as rapidly.

The figures coincided with a speech by David Gruen, head economist at the Department of Prime Minister and Cabinet, who suggested that a series of high profile doomsday forecasts made in 2013 when the terms of trade started falling have not come to pass.

———–

“The biggest surge in coal and iron ore prices in almost seven years has delivered Australia its largest trade surplus on record, injecting a major boost to the federal budget and soothing fears of a technical recession in the fourth quarter.”

the irony..

“a series of high profile doomsday forecasts made in 2013 when the terms of trade started falling have not come to pass.”

yet..

401

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~ by seeker401 on February 7, 2017.

One Response to “Record trade surplus quells doomsday recession chatter in Oz”

  1. Reblogged this on World Peace Forum.

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