Trade tensions between Australia and China could be starting to bite, with exports to Australia’s number one trading partner dropping more than eight per cent in January.
Australian meat exports in particular tumbled 39 per cent in the month, with Commonwealth Securities senior economist Ryan Felsman noting they are subject to Chinese trade restrictions.
“The drop in exports could reflect trade tensions,” Mr Felsman said.
The Australian Bureau of Statistics said iron ore exports also declined by seven per cent or $963 million in January, although this could have been worse if not for the ongoing strength in prices, which were up seven per cent in the month.
“The strong prices have been driven by ongoing Chinese demand and weaker than expected output from Brazil’s largest iron ore mine,” the ABS said in releasing the data on Tuesday.
While metalliferous ores dropped 10 per cent or $1.5 billion overall, they were still up 53 per cent or $4.9 billion higher over the year.
Preliminary figures show total exports were down nine per cent or $3 billion to $32.1 billion in January.
Imports also fell 10 per cent or $2.6 billion to $23.4 billion, lead by a 23 per cent drop in road vehicle shipments, the first decline since May.
This still left a goods trade surplus of $8.8 billion for the month.
The preliminary trade series was introduced by the ABS to give a more frequent update on the economy during the COVID-19 pandemic.
Meanwhile, the weekly ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – fell 0.6 per cent, its third consecutive decline.
Mr Felsman said with COVID-19 vaccinations starting in Australia this week, government restrictions to combat the virus easing and the jobs market continuing to improve, consumer sentiment should pick up.
“But the imminent tapering of government payments – JobKeeper and the coronavirus supplement – could affect the incomes of recipients,” he said.
Treasurer Josh Frydenberg warned his coalition colleagues the transition from the JobKeeper wage subsidy is “going to be bumpy”.
“We never said we could save every job or every business. But we said we could give them their best chance of survival,” he told the joint party room.
However, the Morrison government did announce a $50 per fortnight increase in the JobSeeker dole payment on Tuesday when the supplement ends next month.
Components of the consumer index proved a mixed bag, with perceptions among respondents’ views on their current and future financial conditions declining.
The only bright spot was views on general economic conditions in the next five years, rising 1.6 per cent.
ANZ head of Australian economics David Plank said the latest fall in the index came despite the easing of COVID-19 lockdown restrictions in Victoria.
He was also surprised that the ‘time to buy a major household item’ component dropped by 3.9 per cent – its largest drop since August last year – coming at a time when the housing market is strengthening.
“We would expect the two to go hand-in-hand, so the relative softness of this aspect of sentiment may not endure,” Mr Plank said.