MARKET volatility and weakening of demand from China were features of Australian trade during September, a report prepared for banking behemoth Westpac has noted.
The report was prepared by bank senior economist Mantas Vanagas.
It noted that Australian exporters continued to face “secular headwinds”, including a long-term weakening of demand from China and other major economies for key commodity exports, as well as “a reorientation of global trade following a sharp increase in US import tariffs”.
“However, looking at the monthly data, the most prominent feature of the goods trade flows currently is the market volatility,” the report stated.
“This dynamic is largely explained by lumpy gold export flows, which lead to significant changes in export values month to month.”
It noted that the headline goods trade surplus in August narrowed by more than $5bn to $1.1bn, the lowest level in more than seven years.
The release of September data showed “a recovery” to $3.9bn, close to what was described as average level for the year to date.
Export earnings rebounded after an 8.7%mth drop in August (revised from -7.8%mth), rising 7.9%mth.
Non-monetary gold exports were said to be the main driver in both months, falling by almost half before recovering to $5.3bn, slightly above average for the past six months.
Iron ore and coal exports posted “significant monthly increases”, after weaker growth in the previous two months.
Meanwhile, LNG export value fell sharply for a second consecutive month, reaching the lowest level since mid-2021.
Additional commodity data from the ABS showed while lower prices contributed to the LNG decline, the main driver was a fall in quantities.
Meanwhile, rural goods exports rose 0.7%mth, reversing a similar decrease in August.
Rural goods exports have been elevated recently, but further upside potential in the near term appears limited.
The WestPac Agriculture Report showed that Australian agricultural exports were facing significant headwinds, as domestic supply tightens.
Looking ahead, elevated commodity prices are expected to continue to support key commodity exports over the coming months, but, further out, the goods trade balance is likely to face some downward pressure, “as recovering demand is likely to see import growth pick up more strongly than export growth”.