Australia has recorded its first trade deficit in more than eight years after mining exports sank and imports of data centre equipment and fuels soared, according to new data from the Australian Bureau of Statistics (ABS).
First deficit since December 2017
The nation recorded its first trade deficit since December 2017 in the March quarter, with exports of goods and services falling 1.2 per cent amid a drop in iron ore and coal exports. The sale of both commodities was disrupted by Tropical Cyclone Koji in North Queensland and Cyclone Mitchell in parts of the Northern Territory and Western Australia.
It also follows a decline in iron ore exports to China, where a weaker real estate market forced construction to slow down. The government forecasted last year that iron ore export revenues would fall from $116 billion in the 2025 financial year to $97 billion in the 2027 financial year.
Services exports decline
A slump in the number of international students and education-related travel services was the primary factor behind a 1.3 per cent decline in exports of services. This came as Australia reported a 0.8 per cent increase in imports of goods and services.
ABS head of international statistics Jonathon Khoo said the main drivers were an increase in imports of data centre equipment, fuels and lubricants. "(Data centre) equipment imports reached historic highs, led by bulk imports of artificial intelligence server racks amid continued data centre infrastructure investment in New South Wales and Victoria," Mr Khoo said in a statement.
Impact of Iran conflict
He stressed that Iran closing the Strait of Hormuz and disrupting the global oil trade heaped pressure on prices and impacted Australia's imports. "Crude oil and refined petroleum product prices rose significantly as the closure of the Strait of Hormuz lifted oil prices and tightened global supply," Mr Khoo said.
The $1.84 billion goods trade deficit in the March quarter is a significant decline from the $5 billion surplus in the previous quarter. Tuesday's figure comes alongside the ABS revealing that Australia's current account deficit widened to $27.1 billion from $23 billion in the previous quarter.
Impact on GDP
The fall in exports is expected to subtract 0.8 per cent from Australia's gross domestic product in the first quarter, which the ABS will publish on Wednesday. Meanwhile, government spending was flat in the quarter and the ABS estimated that it made no contribution to growth. That left a lot riding on business investment and household consumption.
Forecasts are centred on a 0.5 per cent quarterly rise in GDP when the figures are released, slowing from the 0.8 per cent gain the previous quarter. On an annual basis, GDP likely expanded 2.6 per cent.
RBA rate hikes
The Reserve Bank of Australia has raised interest rates three times this year - in February, March and May - to 4.35 per cent, fully reversing its cuts last year, to head off a war-driven global energy shock. There are signs the rapid-fire rate hikes are working to cool demand, with household consumption falling in April, national home prices flatlining and the unemployment rate starting to drift higher.
The RBA expects economic growth to slow to 1.9 per cent by the second quarter and to 1.3 per cent by the end of the year as policy tightening and the impacts of the Iran war filter through to the economy.
