Australia’s trade surplus has shrunk dramatically, falling to $105 million in October from $1.6 billion the month before.
Economists had been expecting a much higher trade surplus around $1.4 billion.
The worse than expected result was driven by both a 3 per cent slide in exports and a 2 per cent increase in imports, according to the ABS figures.
A big factor in the export decline was a slump in iron ore sales, which fell by 10 per cent over the month to just over $7 billion.
Coal exports were also down 3 per cent to $4.3 billion.
Detailed data on Australia’s two biggest commodity exports show both the quality and price of iron ore fell in October, while it was a massive fall in the volume of hard coking coal exports that caused most of the decline for that sector.
However, Westpac economist Andrew Hanlan said the iron ore slide was not a major cause for concern.
“Metal ores was the main negative, as anticipated, down $0.8 billion, dented by a dip in the iron ore price, which has subsequently rebounded,” he wrote in a note.
But Capital Economics analyst Paul Dales said that there are signs of weakness for iron ore and coking coal exports going forward and Australia’s dollar is still too high on a trade-weighted basis.
“The pollution controls in China will presumably restrain the demand for Australia’s iron ore and the stronger dollar will continue to hit trade in services,” he wrote.
“So it may only be a matter of months before the trade surplus turns into a deficit.”
Australia’s LNG export boom is gathering steam, with shipments up 22 per cent as prices eased just 1 per cent.
“The upswing in LNG exports is a plus going forward, with considerable further upside, as additional capacity comes on stream,” Mr Hanlan added.
Imports rise on falling dollar, China keeps dominating trade
Also weighing on the surplus was an increase in imports, with a strong rise in consumption goods and a fall in capital goods, which are things like machinery, technology and industrial equipment used by businesses in production processes.
Mr Hanlan said a weaker Australian dollar contributed to the rising import bill.
“The cost of imports increased in October as the currency fell, down 2.3 per cent against the US dollar, to 77.9 cents,” he noted.
“Fuel imports, often volatile, provided the surprise, jumping by $274 million.”
Over the 2016-17 financial year, China accounted for roughly a quarter of Australia’s two-way trade, dwarfing the next biggest contributions from Japan and the US, which were both around 10 per cent.
These nations in turn accounted for roughly twice as much trade as Australia’s next biggest trading partners, South Korea, the United Kingdom, India and Singapore.