By Ambar Warrick
Investing.com -- Australia’s trade balance shrank more than expected in December, data showed on Tuesday, driven largely by a fall in the exports of mineral fuels and mining goods, while imports increased slightly on demand for overseas travel.
Australia’s trade balance fell to a surplus of A$12.24 billion (A$1 = $0.6892) from A$13.20B in the prior month, the Australian Bureau of Statistics (ABS) said in a statement. The reading was below expectations for a trade surplus of A$12.50B.
Exports shrank 1% in December to A$57.84B, driven largely by a decline in metal shipments, which dropped 15.4% from the prior month. Exports of metal ores, coal, and mineral fuels also shrank, driven by a mix of weakening overseas demand and low local production volumes due to the holiday season.
But a decline in mining exports was offset by a large jump in shipments of finished goods, mainly sugar and wine.
Australian imports grew 1% during December to A$45.60B, with the ABS attributing the rise to increased demand for travel services. Increased imports of capital goods also drove up the figure, as did demand for leisure goods imports.
Tuesday’s figures are yet to reflect a reopening in China - Australia’s biggest trading partner. The country relaxed most anti-COVID restrictions and reopened its international borders in January, which is expected to drive its commodity demand higher.
A recovery in Chinese tourism to Australia is also expected to help drive increased capital flows to the country.
But the Australian economy faces increased pressure from high inflation and rising interest rates. The Reserve Bank is widely expected to hike interest rates later on Tuesday, with inflation hitting an over 30-year high in the fourth quarter of 2022.
Weakening economic trends across the globe are also denting demand for Australia’s key commodity exports, with industrial activity declining in most of the country’s major export destinations in Asia.
The Australian dollar rose 0.2% on Tuesday in anticipation of the central bank.