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Angus Livingston, AAP National Economics Writer
(Australian Associated Press)
Australia is sending more goods overseas than ever before but imports are weaker, housing approvals are falling and the stock market has suffered major losses.
Interest rates will also remain on hold for at least another month – but the Reserve Bank of Australia is flagging more potential cuts before the end of the year.
Australian Bureau of Statistics data released on Tuesday shows the national trade surplus is now at a record $8 billion, with exports climbing one per cent from May to June, while imports fell four per cent.
“Export earnings have been boosted by higher commodity prices, while import volumes are soft at a time of weak domestic demand and with the lower dollar making imports more expensive,” Westpac’s Andrew Hanlan said on Tuesday.
Trade Minister Simon Birmingham said the coalition’s free trade deals with Asian nations were driving the record export figures.
“Increased access to international markets for Australian farmers and businesses has been a major factor in our strong export performance,” Senator Birmingham said.
But while exports were up, the number of new housing approvals dropped 1.3 per cent from May to June, a fall of more than 20 per cent compared to June 2018.
There were 14,501 new dwellings approved nationwide in June, with apartment numbers dropping 29 per cent compared to the same point last year.
Drought is hurting sheep and lamb numbers, with the number of sheep slaughtered down 13 per cent over the past year, and lambs down 9.3 per cent.
The RBA left the official cash rate on hold at one per cent, but signalled more cuts could be necessary to force inflation up.
“It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target,” the RBA’s report said.
Labor’s shadow treasurer Jim Chalmers said the RBA was running out of options.
“The Morrison government’s denial about the weakness in the economy on their watch has left the Reserve Bank with little remaining room to support growth,” he said.
The Australian share market shed nearly two months of gains in the first half-hour of trade, plummeting more than 2.5 per cent in the biggest single-day drop in 18 months, before recovering some ground by the afternoon.
The market turmoil appeared to flare up after the United States Treasury department said it had determined for the first time since 1994 that China was manipulating its currency.
Analysts said Australia was so far relatively insulated from the US-China trade war, assuming Chinese demand doesn’t soften too much.
“Export shipment volumes from major Australia ports are back at record highs and continue to signal Chinese demand for iron ore/coal is still robust,” JP Morgan’s Tom Kennedy said.