Boom enters exports phase
The Bureau of Statistics reported a dramatic $5.6 billion lift in Australia's trade balance in the March quarter. Rising exports and falling imports delivered a small $367 million surplus, up from a $5.2 billion deficit in December.
Mining was most of the story. After seasonal adjustment, exports of iron ore and other metals rose by $2.2 billion or 11 per cent - and imports of miscellaneous capital goods fell by $1.1 billion or 26 per cent.
The bureau estimates that in the six months to March, imports of construction machinery fell by 44 per cent year on year. Most of this is used in mining investment.
At face value, the figures suggest that in Professor Bob Gregory's model of the resources boom, Australia is moving from the second to the third stage: from mining investment to mining exports.
In March alone, despite big falls in most mineral prices, mining exports rebounded to $14.85 billion, their best month in almost a year. The bureau will reveal next week how much of this was in volume, and how much in price.
The Bureau of Resource and Energy Economics forecasts that the volume of resource exports will grow 28 per cent in the next five years, as the investment pipeline gradually comes on stream.
But the March quarter growth in seasonally adjusted mining exports could overstate their real strength. This summer was free of the cyclones which severely disrupted mining exports twice in recent summers, inflating seasonal adjustment factors. Last year, seasonally adjusted March quarter exports of metal ores and minerals fell 13 per cent.
The volatile iron ore price also spiked in the March quarter. It has fallen 20 per cent since, suggesting that the June quarter export earnings will fall back.
But the import figures add to evidence that the mining investment boom is winding down more quickly than anticipated. The boom saw imports of specialised machinery become Australia's third-biggest import category. By March, they were back among the also-rans, falling behind pharmaceuticals, computers and others.
Economists fear Thursday's capital expenditure survey will forecast lower capital expenditure in 2013-14. Westpac senior economist Andrew Hanlan cautioned that whereas the forecast usually swells between December and March, this time it could shrink.
"We see the risks as skewed to the downside," Mr Hanlan said. "Mining is increasingly focused on cost-cutting, and the initial estimate for services appears to be overly optimistic."
Frequently Asked Questions about this Article…
Stage three of the resources boom, as described in the article, means Australia appears to be shifting from heavy mining investment (building mines and buying specialised machinery) into a phase dominated by mining exports — more ore and mineral shipments rather than large new capital spending.
Mineral exports rose 11% in the March quarter, with exports of iron ore and other metals increasing by about $2.2 billion. The growth in mining exports was the main driver of a $5.6 billion lift in the trade balance for the quarter.
The Bureau of Statistics reported a $5.6 billion improvement in Australia’s trade balance in the March quarter, moving from a $5.2 billion deficit in December to a small $367 million surplus, driven by rising exports and falling imports.
Imports of specialised construction and mining machinery fell sharply — the bureau estimated a 44% year‑on‑year fall in the six months to March — because mining investment has been winding down. This matters because lower machinery imports signal a slowdown in the investment phase of the resources boom, affecting future capital expenditure.
The article cautions they may overstate real strength: seasonally adjusted growth was helped by a cyclone‑free summer (which removed past export disruptions), and last year seasonally adjusted March quarter exports actually fell 13%. The bureau will also release detail on how much growth was volume versus price.
Iron ore prices spiked in the March quarter but have since fallen about 20%, which suggests June quarter export earnings could fall back. A price-driven spike in one quarter can therefore lead to weaker earnings in subsequent quarters if prices retreat.
The Bureau of Resource and Energy Economics (BREE) forecasts that the volume of resource exports will grow about 28% over the next five years as the investment pipeline gradually comes on stream, implying rising export volumes even as investment activity slows.
Yes — economists surveyed in the article warned the upcoming capital expenditure survey could forecast lower capital expenditure for 2013–14. Westpac senior economist Andrew Hanlan said risks are skewed to the downside because mining is increasingly focused on cost‑cutting and some initial service estimates may be overly optimistic, making the capex survey an important indicator of the sector’s investment outlook.
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