Australia's trade gap widens as imports rise

SYDNEY - Australia's trade deficit widened to an eight-month high in November as imports of consumer goods, machinery and aircraft increased, outpacing a gain in exports.

The Australian Bureau of Statistics said yesterday that the trade shortfall rose to A$2.47 billion ($2.68 billion), from a revised A$1.38 billion in October. Imports jumped 7 per cent and exports rose 1 per cent.

A widening trade gap may have subtracted from Australia's economic growth rate in the final three months of last year, extending a slowdown which saw the economy expand at its slowest pace in a year during the third quarter.

The central bank will keep interest rates unchanged next month, amid signs of slowing growth and contained inflation, say economists surveyed by Bloomberg News.

The Reserve Bank of Australia's overnight cash rate target is 5.5 per cent

"We've got another blowout in the trade deficit and it looks like net exports may be a drag on economic growth again," said Stephen Koukoulas, chief Asia-Pacific economist at TD Securities. "We're still waiting for an improvement in trade to fuel the economy as consumer spending slows."

The median forecast in a Bloomberg News survey of 18 economists was for a A$1.8 billion trade gap.

Australia's A$860 billion economy grew 0.2 per cent in the three months to the end of September, the slowest pace since the same period in 2004.

Central bank governor Ian Macfarlane said he expected rising exports and business investment would fuel economic growth as consumer spending and home building waned. Total imports rose to A$17.59 billion in November. Imports of capital goods, which include business machinery and vehicles, climbed 10 per cent and imports of consumer goods jumped 11 per cent.

Imports of intermediate goods, which includes fuel, rose 6 per cent.

Australia's trade deficit may narrow this year as exporters expand mines to meet increased global demand for commodities while slowing domestic spending curbs imports.

BHP Billiton, the world's largest miner, is spending US$11.9 billion ($17.2 billion) through to 2010 to increase production to meet surging demand, led by China.

"The international backdrop for Australian exporters going into 2006 is positive," said Robert Henderson, chief markets economist at National Australia Bank.

"China and the US are likely to continue to underpin global growth over the year ahead."

Total exports rose in November to A$15.12 billion. Farm goods fell 3 per cent. Shipments of non-rural goods, which include metals and minerals, rose 2 per cent.

Exports of services, which includes tourist spending in Australia, dropped 1 per cent.

Australia's shipments to China were worth A$7.08 billion in the five months to the end of November, up from A$4.78 billion a year earlier.

- BLOOMBERG