News Summary: Australia's Trade Surplus

1.) For the first time since 2011, Australia has recorded a moderate trade surplus. The surplus was caused by a 1% gain in exports to $27.75 billion and a 1% decline in imports to $22.44 billion. Export growth was due to an 11% rise in "other" mineral fuel revenue, an 8% increase in cereal grain exports, and a 2% gain in metal ore and mineral sales. The decline in imports seems to confirm that the mining construction boom is starting to slow down. An 11% fall in imports of capital goods, like heavy machinery, to $4.73 billion in March demonstrates that businesses were spending less overall on expansion. Imports such as consumption goods remained unchanged, car imports and leisure goods continued to rise, but clothing and footwear imports saw a 9% decline. RBC economist Michael Turner said, "The themes within today's trade data are likely to be repeated in coming months: an improving trade balance as the resource boom shifts from the investment phase (requiring higher capital imports) to the export phase". However, there are also economists that have a more pessimistic outlook for the Australian economy. Westpac senior economist Andrew Hanlan stated, "We see the risk that Europe remains in recession, that the pick-up that we've seen in the US peters out and that China - while it has improved somewhat - there's a lack of follow through. So we're actually forecasting commodity prices to decline from the middle of this year, and that will tend to push the trade numbers back into deficit sometime during the second half of 2013".

2.) This relates to the equation for GDP that we have been continually referring to in class. The equation for GDP is GDP = Consumption + Investment + Government + Net Exports (Exports - Imports). So, hypothetically, if Australia continued to see and increase in exports and a decrease in exports they would also see a rise in GDP. Certain economists are predicting that trade will fall back into a deficit. A trade deficit meaning that imports exceed exports, which would cause GDP to then fall.

3.) I believe that a solution to solving trade deficit permanently, not only in Australia, but also in many countries all over the world, is clearly something that economies continually struggle with.

http://www.abc.net.au/news/2013-05-07/australia-swings-back-to-modest-trade-surplus/4674458?section=business