Bruce Jennings

Last week on the same day as the RBA decided to leave cash rates steady the ABS released Australia’s latest trade data. The August numbers confirmed that the slide in Australia’s trade performance continues unabated and the devaluation of the $A has at this point not offset the dramatic fall in our commodity export prices. The table below shows that over the last 6 months Australia has racked up a trade deficit over $16.5 billion. The prior 6 months had recorded a deficit of about $8 billion. The deterioration by of over 100% or $8 billion in just 6 months is alarming given the 15% depreciation of the $A against the $US over the same period. Simply stated the $A has not devalued enough to make Australia competitive in international trade. The current annual trade deficit run rate of over $30 billion will ensure that Australia’s current account (which includes net interest paid on foreign debt) will stay firmly in the red [...]