Wayne Cole

SYDNEY (Reuters – Australia’s third quarter trade performance was significantly better than originally thought. It suggests an upside risk of growth, even though imports outpaced exports. Additionally, dividend payments were largely sourced offshore.

The Australian Bureau of Statistics released Tuesday’s data showing that the surplus in current accounts has declined to A$12.7 trillion ($9.22 billion) from A$22.2 billion during the third quarter.

Net exports were down 0.2 percent from quarter gross domestic products, whereas analysts expected an increase of 1.0 percentage.

Although government spending was a small drag, it was much more than offset in quarter by the large increase in stocks of firms. Analysts remain bullish on economic growth.

Andrew Hanlan from Westpac, an economist senior, stated “Net exports have a significantly smaller drag on growth for Q4 than we anticipated.” Our Q4 GDP projection has been upgraded from 2.8% to 3.3%qtr.

On Wednesday, figures for fourth-quarter GDP will be available. The median forecast was for a substantial rise of 3% due to increased consumer demand following coronavirus lockdowns.

Retail sales are on the rise and banks report healthy card spending through February.

This strength supports the Reserve Bank of Australia’s optimistic outlook for growth at its Tuesday policy meeting.

While the central bank seems certain that it will maintain interest rates at 0.1%, they reiterated their willingness to accept a slow increase in inflation while waiting for long-awaited gains in wage growth.

Philip Lowe (RBA Governor) stated it was possible that a first rise in interest rates could occur this year, if the economy recovers. However, markets have already priced in rate increases for July.

Russian aggression in Ukraine has created geopolitical uncertainty and, when combined with the massive floods that ravaged New South Wales and Queensland, it is threatening to dampen public sentiment.

A Tuesday ANZ consumer survey showed a dramatic drop in sentiment, and inflation expectations reached a seven year high of 5.3%. This was as petrol prices hit new record highs.

It seems that the heat is also coming from the property market, with Sydney’s prices falling for the first 17-months. However, the move to Australia continues.

CoreLogic figures showed that February saw a 0.6% increase in national home prices, nearly half of the 1.1% rise in January. The value of Sydney fell 0.1% while Melbourne was flattened by an increase in supply and higher mortgage rates.

($1 = 1.3782 Australian dollars)