Australian Trade Gap Smaller Than Expected on Imports Drop

Australia’s [B]Current Account Balance[/B] deficit narrowed more than economists expected in the first quarter, showing a shortfall of just –A$4.6 billion versus expectations of a –A$5.4 billion result. The improvement came as the drop in Australians’ demand for foreign-made goods outpaced sagging outbound shipments. Imports fell -9.2% from the three months to December 2008, while exports declined -7.5% during the same period. On balance, external trade added 2.2% to overall economic growth in the three months to March. The Reserve Bank of Australia has argued that “signs of stabilization” in global growth (and particularly in China, a key trading partner) will help the larger antipode weather the current crisis better than most other industrialized economies. However, Westpac Banking Corp chief economist Bill Evans expressed skepticism about whether continued improvement in trading terms is sustainable, saying the deficit will likely expand in the second quarter as large declines in coal and iron ore prices weigh on export volume measures.