Trade deficit 'may turn into surplus'

AAP

THE nation's trade deficit, which narrowed to a seven-month low in January, could turn around into a surplus by the end of calendar 2010, buoyed by a rise in key export commodity prices, economists say.

The balance of goods and services posted a deficit of $1.176 billion in January, seasonally adjusted, from a downwardly revised deficit of $2.174 billion in December, the Australian Bureau of Statistics (ABS) said on Thursday.

It was the narrowest trade deficit since June 2009's $376 million figure.

The ABS said exports in January 2010 rose by a seasonally adjusted one per cent and imports fell three per cent.

The fall in imports was due to a $666 million fall in fuel and lubricant consumption, which led to a deficit in the category of $1.958 billion, from $2.624 billion in December.

Commonwealth Bank economist James McIntyre said the fall in imports highlighted the volatility of the series.

"I wouldn't read into the (overall) imports fall," he said.

"If you can explain how and why refined petrol falls in a month, or crude petroleum falls in the month, I mean maybe a tanker could have been delayed by a day."

ANZ economist Alex Joiner said the trade balance could turn into a surplus in the latter part of 2010 due to expected increases for bulk commodity prices.

"When we see those prices come in mid-year, we are likely to see the deficit turnaround fairly sharply and we are likely to see small trade surpluses by the end of this year," he said.

Dr Joiner also said the narrower January deficit occurred largely because of a three per cent in the volume of imports.

"Intermediate imports were down seven per cent and capital goods eased a bit," he said

UBS economist George Tharenou said the January trade figures would not be a drag on first quarter gross domestic product figures due in May.

"The data suggests it's been about volumes and not prices, which means the net export drag on first quarter GDP will be less than what we saw over the second half of last year," he said.

"If the trends were to continue - with weakening imports and solid exports - you'd think the drag would be less."

Mr Tharenou said the trade deficit subtracted 1.3 per cent from GDP over the second half of last year.

The ABS on Wednesday said gross domestic product (GDP) expanded by 0.9 per cent in the December quarter for an annual rate of 2.7 per cent.

The annual December reading was the fastest yearly pace in 18 months.