Is Australia's trade position as good as it seems?

On 6 July 2010 the Australian Bureau of Statistics released the latest Australian trade in international goods and services figures.

You can see from the attached graphic how the balance of trade on goods and services has returned to positive. This was greeted with a degree of glee. However, the results are not as clear cut as that. 

A very significant contributor to this result was a rise in non-monetary gold exports. These rose in seasonally adjusted terms by $772m or 66 per cent.

We can compare this with:

• an increase in rural exports in seasonally adjusted terms of $235m, up 11%
• An increase in exports in seasonally adjusted terms of non-rural goods of $385m, up 2 per cent.

The main components contributing to the rise in seasonally adjusted estimates for non-rural goods were:

• coal, coke and briquettes, up $329m (10 per cent)
• metal ores and minerals, up $157m (up 3 per cent)
• other manufactures, up $52m (up 4 per cent).

If you look at these numbers, you can see just how important gold was.

If we now look at other aspects of trade performance, I have had a particular interest in services, in part because of the importance of Australia's international education sector. I have been monitoring this closely because I expect this to drop by at least a third over the next year.

The adjoining graphic shows just how flat Australia's service exports have been. The country is simply not doing very well here.

While the overall return to surplus on trade in goods and services is welcome at this point in the cycle, it seems to me to be vulnerable.

In do try to adopt a slightly contrary position in my analysis. By this I mean that I like to test common assumptions and views. I am been concerned for a little while that the structure of our trade has been increasing Australia's economic vulnerability. However, detail here is a matter for another post.