TERMS OF TRADE – AUSTRALIA

Iron, coal rebound to lift rates

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Original article by David Rogers, Barry FitzGerald
The Australian – Page: 19 & 22 : 29-Nov-16

Coal and iron ore are currently trading at prices that are significantly above the forecasts made in the Australian Government’s May 2016 Budget. Based on current prices, the nation’s export earnings in 2016 will be about $A80bn higher than in 2015. Tim Toohey of Goldman Sachs says this should be sufficient to avert the risk of Australia’s credit rating being downgraded. Financial markets believe that there is also now a better-than-even chance of an increase in the cash rate by the end of 2017.

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GOLDMAN SACHS AND PARTNERS AUSTRALIA PTY LTD, RESERVE BANK OF AUSTRALIA, AUSTRALIAN NATIONAL UNIVERSITY, BHP BILLITON LIMITED – ASX BHP, RIO TINTO LIMITED – ASX RIO, BLOOMBERG LP

Trade surge could cut $23b from deficit

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Original article by Jacob Greber
The Australian Financial Review – Page: 4 : 14-Oct-16

Australia’s 2016-17 Budget deficit is forecast to be $A63.2bn, but analysis shows that a sustained rise in commodity prices could slash the deficit by around $A23bn. The prices of coking coal, thermal coal and iron ore have risen sharply since August 2016, and Commonwealth Bank economist Kristina Clifton says the nation’s terms of trade would improve if prices remain at around current levels for the next six months. She adds that this would also have a flow-on effect on household incomes.

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COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA. DEPT OF THE TREASURY, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

Treasury’s medium-term price forecast paints unsettling picture

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Original article by Geoff Winestock
The Australian Financial Review – Page: B13 : 4-May-16

The Australian Government’s May 2016 Budget forecasts include a 1.35 per cent increase in the nation’s terms of trade in 2016-17. The Mid-Year Economic and Fiscal Outlook had forecast a 2.25 per cent decline in the terms of trade. Meanwhile, the Treasury has upgraded its forecast for the iron ore price in 2017 from $US39 per tonne to $US55. The price of metallurgical coal has been upgraded from $US73 per tonne to $US91.

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AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN LABOR PARTY

Terms of trade slump mires budget outlook

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Original article by Jacob Greber
The Australian Financial Review – Page: 3 : 29-Jan-16

The Australian Government’s mid-year budget update in December 2015 had forecast a 10.5 per cent decline in the nation’s terms of trade in 2015-16. However, the latest trade data has prompted analysts to estimate that the terms of trade declined by between 4.5 per cent and 5.2 per cent in the December 2015 quarter. The downturn in the prices of key export commodities have hit the terms of trade, which may in turn significantly impact on government revenue.

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AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN BUREAU OF STATISTICS, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, INDUSTRY SUPER AUSTRALIA PTY LTD, JP MORGAN AUSTRALIA LIMITED, FITCH RATINGS LIMITED

Fed, China fears hit iron ore, copper

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Original article by Jacob Greber, Stephen Cauchi
The Australian Financial Review – Page: 1 & 13 : 19-Nov-15

The latest downturn in the iron ore price will put pressure on Australia’s terms of trade as Treasurer Scott Morrison prepares to release a Budget update in late 2015. Budget forecasts in May were based on an average iron ore price of $US48 per tonne in 2015-16. Although the price of the steel input rebounded to around $US60 in July, it has fallen to $US45.58 in mid-November. Slower growth in wages will also impact on government revenue.

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AUSTRALIA. DEPT OF THE TREASURY, RESERVE BANK OF AUSTRALIA, AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET, DELOITTE ACCESS ECONOMICS PTY LTD, AUSTRALIAN BUREAU OF STATISTICS, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, RIO TINTO LIMITED – ASX RIO, UNITED STATES. FEDERAL RESERVE BOARD, BLOOMBERG LP

Worst growth rate since Coalition elected Hockey shrugs off bad news

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Original article by Jacob Greber
The Australian Financial Review – Page: 1 : 3-Sep-15

A spike in government spending, mainly on defence, helped prevent the economy shrinking for the first time in more than four years in the June quarter of 2015. Exports were down and investment was weaker, cutting GDP growth to 0.2 per cent from 0.9 per cent for the previous three months.

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AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN BUREAU OF STATISTICS, RESERVE BANK OF AUSTRALIA, VICTORIA UNIVERSITY, AUSTRALIAN LABOR PARTY, DELOITTE ACCESS ECONOMICS PTY LTD, ALPHABETA, INDUSTRY SUPER AUSTRALIA PTY LTD

Softer China blows out the budget deficit

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Original article by Phillip Coorey
The Australian Financial Review – Page: 1 & 4 : 15-Dec-14

The Australian Government’s mid-year Budget update will scale back its forecast for 2014-15 revenue to $A379bn, compared with expectation of $A386bn in the May 2014 Budget. Treasurer Joe Hockey has attributed the revenue shortfall primarily to the decline in commodity prices. The update also forecasts that Australia’s terms of trade will fall by 13.5 per cent, compared with a previous forecast of a 6.75 per cent decline. The Government has also downgraded its forecast for China’s economic growth

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AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIA. DEPT OF FOREIGN AFFAIRS AND TRADE, AUSTRALIAN LABOR PARTY

Deficit heads for $40bn

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Original article by David Crowe
The Australian – Page: 1 & 2 : 21-Nov-14

Citigroup believes that the Australian Government’s forecast for a 2014-15 Budget deficit of $A30bn will have to be revised up by $A10bn, with a major factor the fall in the iron ore price and the effect on the nation’s terms of trade. Treasurer Joe Hockey, who will soon release the Mid-Year Financial and Economic Outlook data, concedes that the commodities slump is an issue. However, he also stresses that there is great potential to boost services sector exports

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AUSTRALIA. DEPT OF THE TREASURY, CITIGROUP PTY LTD, DELOITTE ACCESS ECONOMICS PTY LTD, HSBC AUSTRALIA HOLDINGS PTY LTD, JP MORGAN AUSTRALIA LIMITED, MACROECONOMICS.COM.AU PTY LTD, AUSTRALIAN LABOR PARTY

Risk of ‘fiscal fiasco’ if China runs off the rails

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Original article by David Uren
The Australian – Page: 2 : 27-Oct-14

Deloitte Access Economics has released a new report on the potential impact on Australia of a more rapid slowing of GDP growth in China. The latter accounts for 38% of Australian exports, and if its growth rate falls to under 4% per annum Australia is likely to experience a recession. The forecasting firm warns that the Federal Government must do more to rein in the Budget deficit in light of this scenario. However Deloitte still maintains that the most likely outcome is growth in China of 7% or more, and a fall in Australia’s terms of trade of 9.2% for 2014-15 before less dramatic declines of between 1% and 2% a year in the period to 2018-19

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DELOITTE ACCESS ECONOMICS PTY LTD