Australia on a roll but analysts wary

SYDNEY - Australia posted a much larger than expected trade surplus last month, marking the longest run of positive trade numbers since the early 1970s, but analysts remain wary about the outlook.

It was another piece of good economic news for the conservative Howard Government, which has campaigned heavily on its economic management credentials in the run-up to the federal election in less than two weeks.

The September balance of goods and services showed a surplus of $A$45 million ($664.5 million), well above analysts' expectations for a surplus of $A150 million.

Underpinning the result was a surprising 2 per cent increase in exports, despite the sliding world environment, as Australian dollar commodity prices rose as the currency fell. Imports declined by 2 per cent as domestic demand softened.

But the market for Australian goods and services is unlikely to hold in a synchronised global slowdown.

"It's still a very good trading performance, but there must also be question marks about the outlook for exports with those to the most vulnerable Asian economies already declining," said ANZ senior treasury economist David de Garis.

September was the eighth consecutive monthly surplus, marking the longest run of surpluses since Australia posted 23 in a row from January 1972 to November 1973, says the Bureau of Statistics.

But the Australian dollar barely budged from its post near 50.5USc.

"I think everyone would recognise that exports are going to be a significant drag on growth over the next six to nine months, said ABN Amro chief economist Kieran Davies.

Analysts had expected trade disruptions after the September 11 air attacks on the US to have a bigger impact on the figures as US flights were grounded for several days.

US components for manufacturing and electronics in Asia and Australia are usually air freighted.

And international tourism is believed to have suffered, with cancellations from North America and Asia immediately after the attacks.

It is not clear how many trips were postponed or cancelled altogether. Tourism provides about 12 per cent of Australian exports.

In September, services exports, which includes tourism and education, fell by 3.3 per cent.

The monthly report pointed to another low outcome for the September quarter current account deficit, which is already at a cyclical low of about 2 per cent of GDP.

It is likely to rise to 3 per cent in coming quarters, still well below the post-Asian crisis peak of 6 per cent.