A drop in gold exports and a broad-based pick up in imports drove the goods trade surplus to a seven-year low in August. Goods trade balance: $1.8bn. Export values: down 7.8%. Import values: up 3.2%mth.
Australian exports and imports continue to be shaped by multiple, distinct narratives, each evolving at its own pace. As previously highlighted, a secular weakening in demand for Australia’s key commodity exports - reflecting China’s consolidation of its production capacity after reaching peak steel production levels, alongside a global shift away from coal towards cleaner energy sources – implies a subdued outlook for long-term export growth. In the medium term, the surge in US imports during Q1 and the subsequent pullback generated a whiplash effect. Overlaying this, the direct impact of US tariffs has prompted adjustments in global trade flows. Domestic industry developments also remain evident in monthly trade data, most notably the significant fluctuation in Australian gold exports and imports following the recent surge in global gold prices.
In this context, Australian goods trade flows have remained notably volatile. July saw robust exports and subdued imports, resulting in a marked widening of the monthly goods trade surplus to a seventeen-month high of $6.6bn (revised down from $7.3bn). However, the latest data for August show a sharp narrowing to $1.8bn, the lowest surplus recorded in seven years.
Export earnings fell by 7.8%mth – the weakest outcome in over three years. Non-monetary gold, a particularly volatile component, was the primary driver, contracting by almost half after reaching record highs in July. Among other major exports, coal and liquefied natural gas (LNG) values declined significantly, while iron ore exports were largely flat. As a result, the overall non-rural goods category, which also includes manufacturing exports, declined by 2.5%mth. According to additional ABS data, volumes of both LNG and coal exports contracted. While firmer coal prices helped cushion the impact on export values, falling LNG prices exacerbated the decline. In contrast, rural goods exports maintained upward momentum, approaching the upper end of their recent range, even as meat exports – its primary subcategory – eased slightly. Australian meat exporters benefited from new US import tariffs, increasing shipments to the US, with the latest data showing only a minor setback.
Analysing trade by destination, flows to most major trading partners decreased, with the US standing out. As gold outflows shrank, total exports to the US reverted closer to last year’s levels, after more than doubling in July. Exports to the UK reflected a similar pattern, also driven by gold. Conversely, exports to China and the EU proved more resilient, having stabilised after earlier weakness.
The import bill, on the other hand, surprised to the upside, rising 3.2%mth to reach a new record high. All three major import categories posted gains. Consumption goods imports grew nearly 6%mth, though, given sharp declines in the preceding two months, the three-month growth rate remained negative, signalling a possibility of softer consumer spending in the September quarter. Meanwhile, both capital and intermediate goods imports increased by around 2.0% during the month. Country-specific import results were mixed, with changes in goods inflows from China and the US – Australia’s two largest sources – largely offsetting each other.
Looking ahead, we expect monthly volatility in goods trade flows to persist, as the aforementioned structural and cyclical forces continue to tug exports and imports in different directions. The outlook for gold exports is particularly consequential in the near term. Given sustained increases in global gold prices and strong gold mining activity domestically, it is likely that this export category will rebound in the coming months and quarters.
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