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Australia’s trade balance falls in January

By Lawrence Gash

Analysts predict narrowing of trade surplus following Covid-19 epidemic

Australia trade balance falls in January

Australia has reported a trade surplus of AUD 5.21bn for January 2020. This figure was down on the previous month’s AUD 5.37bn surplus but higher than analyst predictions of AUD 4.8bn.

Both imports to and exports from the country fell by 3 per cent month on month. Shipments particularly to China had already declined throughout the second half of 2019 as the US-China trade war wore on.

The first emergence of the now-global Covid-19 virus in China eclipsed the signing of a phase-one trade deal between the world’s two largest economies, giving Australia no reprieve.

While the trade balance changed little between December and January analysts are anticipating a more substantial difference in February.

The Australia and New Zealand Banking Group (ANZ) stated: “We think the trade surplus will narrow substantially, reflecting the drop in Chinese travellers and our expectation of less international travel more generally, with some offset from fewer Australians travelling overseas.”

The Australian dollar (AUD) has fallen to its lowest level in recent times during the past 12 months. However, following the arrival of the coronavirus in America, the currency has gained slightly on the US dollar (USD).

Despite consistent and somewhat bullish figures, the AUD is trading fairly flat. By mid-morning trading 1 AUD purchases 0.66203 USD. Investors are seemingly holding their breath and waiting to gauge the size of the coronavirus outbreak on Australia’s economy.

The country’s political and financial leaders are arguably just as uncertain. Last month, Phillip Lowe, the Governor of the Reserve Bank of Australia (RBA), maintained interest rates despite concerns for low wages and the country’s housing market. Lowe asserted that it was “too early to determine how long-lasting the impact will be.”

On Tuesday Lowe cut interest rates to their lowest ever level of 0.5 per cent citing the “significant effect” of the outbreak on the nation’s economy.

Australia’s benchmark S&P/ASX 200 index has yo-yoed since the decision but closed up 1.11 per cent, trading at 6,395.7.

FURTHER READING: Passenger car sales in China plunge by 80% in February

FURTHER READING: Covid-19 update: IMF makes $50bn available to fight the outbreak, while Flybe collapses

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