Australias GDP beats expectations

Australias economy is showing signs of picking up momentum， with a stronger than expected GDP growth of 2.5% over the past year.

It is a marked acceleration from the June quarters disappointing annual growth rate of 2% and the fastest economic growth in 18 months， but still below the economys long-term trend.

GDP expanded by 0.9% in the September quarter against market expectations of 0.8%.

The stronger performance was driven by a pick-up in net exports and in particular by growth in mining activity which was up 5.2% after a decline in the previous quarter.

Exports in seasonally adjusted terms rose 5.4%， while imports fell 1.8%.

The oil and gas sector drove the rise with a 10.4% increase， while iron ore， up 5%， and coal， up 4.6%， also made strong contributions.

The principal black spot was a 6.4% decline in rural exports for the quarter.

Growth in the export sector more than offset the falls in private and public investment， which were down 2.9% and 9.2% respectively.

However JP Morgan economist Tom Kennedy said it appeared “all Australias eggs are in the net trade basket”.

“As a result， the domestic economy excluding trade contracted 0.6% in the quarter， the largest quarterly contraction since the financial crisis，” Mr Kennedy said.

He noted the booming trade outcome was， in large part， supported by a rebound in resources shipments， following weather-related port closures in the second quarter.

“As such， the magnitude of todays contribution is unlikely to be repeated in upcoming releases，” Mr Kennedy said.

The biggest component of GDP， household consumption， increased 0.7% in seasonally adjusted terms， while government consumption also rose 0.7%.

International trade deficit slumps 38% to AU$3.3b in October

Australias international trade has deteriorated dramatically， with the deficit blowing out by 38% to AU$3.3 billion in October.

It is the largest monthly trade deficit since the weather-affected AU$3.5 billion deficit in June 2015， and the fifth largest on record.

The result was driven by an AU$829 million drop in exports， while imports remained flat.

The blow-out surprised the market which had forecast a fairly flat result in line with Septembers AU$2.4 billion seasonally-adjusted deficit.

The fall in exports was driven by an unexpectedly poor performance in the value of commodity shipments， with both prices and volumes showing weakness.endprint

Iron ore exports fell by AU$366 million or 6%， while the value of metal shipments tumbled 16%.

Both the value and volume of iron ore exports to the key China market fell in October.

Overall the China iron ore trade fell by 15% — or AU$426 million — on the back of an 11% decline in volumes and a 4% price drop.

Rural exports also went backwards， with the value of grain shipments falling 10% and meat down 4%.

The figures represent a poor start to the fourth quarters current account data， which flows directly into the next GDP reading.

Australias better than expected third quarter economic growth of 0.9% was driven by a strong 5.4% pick-up in net exports.

JP Morgans Tom Kennedy said the weakness was across the board.

“Australias monthly port data indicates Octobers unimpressive export growth was a combination of both price and volume weakness， and is consistent with the idea that the bumper net trade contribution in GDP data is unlikely to be repeated，” Mr Kennedy said.

The blow-out supports the view that the Australian dollar is still too high to support strong growth commodity exports.

RBCs Michael Turner said the Australian dollar has been moving in the “wrong” direction and putting commodity prices such as iron ore under greater pressure.

“The peak-to-trough move in the Australian dollar price of iron ore since September has been an eye-catching 33%， while the dollar against the US dollar is up 2.4% over the same period but， more importantly， the nominal trade-weighted index is up 4.5%，” Mr Turner said.

Australia develops new terror alert system to deal with “probable”threat of attack

The Australian government has developed a new terrorism warning system aimed at informing the public about the likelihood of terrorist attacks in Australia.

The National Terrorism Threat Advisory System （NTTAS） was announced on Nov.26 by the Attorney General George Brandis and Justice Minister Michael Keenan.

In a statement， the two ministers said NTTAS was designed to provide as much information as possible to Australians in the current threat environment.

NTTAS has five levels， which include Certain （red）， Expected （orange）， Probable （yellow）， Possible （blue） and Not expected （green）， to indicate the national threat level. The current threat of an attack in Australia is “probable.”

Under the existing system， the terror threat escalates from low to medium， high and then extreme. The level was raised to high in September last year.endprint