Australia’s trade deficit blew out to more than US$2 billion in August, data showed yesterday, with exports diving as China’s slowdown hit the key mining sector, increasing pressure on the economy.
The A$2.027 billion (US$2.073 billion) deficit reported by the Australian Bureau of Statistics was triple the A$685 million forecast by analysts and reflected a 3 percent drop in exports driven by sagging resources demand.
It is the worst monthly result since March 2008.
The value of metal ore and mineral shipments fell by seven percent on-month to A$6.216 billion, largely in the iron ore and copper sectors, with coal, coke and briquettes down 11 percent to A$3.012 billion.
Plunging prices were the primary driver, with the cost of iron ore lump down 2 percent and iron ore fines down 6 percent from the previous month. Steelmaking and thermal coal prices each dipped 3 percent on-month. It was the third consecutive month of price falls for the major commodities.
The conservative opposition seized on the figures as proof that new taxes on coal and iron ore profits were harming Australia’s economic prospects.
However, Australian Prime Minister Julia Gillard rejected the claims as “nonsense” and said it was “wrong and inappropriate for anybody to be talking the Australian economy down.”
“We came out of the global financial crisis strong — we saved 200,000 jobs, we didn’t have a recession, we have an economy... that is expected to grow by about 3 percent in the coming year,” she told reporters.
“We have got a resources boom where we are yet to see the investment peak and the production peak,” she said.
Australia’s central bank on Tuesday slashed interest rates to their lowest level since the global financial crisis, shaving 25 basis points off the official cash rate to 3.25 percent owing to the softening economic outlook.
The Reserve Bank of Australia noted China’s slowdown and said the boom in mining investment in Australia was expected to peak next year, with serious ramifications for the wider economy. China is Australia’s top trading partner.
Australia’s growth has already cooled, halving from 1.4 percent in the first quarter of last year to 0.6 percent in the three months to June.
The government slashed its mining export forecasts for this year and next by 10 percent last month, tipping earnings to fall for the first time since the global downturn as prices for coal and iron ore plunge 27 to 28 percent.
Resources firms including BHP Billiton and Fortescue have recently shelved or scaled back projects in Australia.