Australia's August Trade Gap Probably Widened to A$1.4 Billion

By Shamim Adam

Oct. 2 (Bloomberg) -- Australia's trade deficit probably widened in August as the economy's expansion spurred demand for consumer goods, outpacing growth in mining shipments from the world's largest exporter of iron ore and coal.

The trade gap nearly doubled to A$1.4 billion ($1.25 billion) from A$756 million in July, according to the median estimate of 23 economists surveyed by Bloomberg News. The Bureau of Statistics will release the report tomorrow at 11:30 a.m. in Sydney.

Rising wages and employment is stoking economic growth, boosting imports as retailers open new stores to benefit from an increase in consumer spending. Growth in exports may slow as insufficient port and rail facilities prevent mining companies such as BHP Billiton Ltd. and Zinifex Ltd. from keeping pace with Asia's growing appetite for resources.

``We've seen strong retail numbers and consumer demand, and that's consistent with expectations of higher imports,'' said Phil O'Donaghoe, an economist at Deutchse Bank AG in Sydney. ``That will worsen the deficit, as export growth is expected to be weaker this month.''

The Australian dollar has risen 12.9 percent against its U.S. counterpart since the start of 2007, making imports cheaper. Spending by Australian households rose 0.6 percent in the second quarter, contributing 0.3 percentage points to growth. Wages growth edged higher in the same period, climbing 1.1 percent.

Harvey Norman

Harvey Norman Holdings Ltd., the nation's largest electronics retailer in August announced its annual profit exceeded analyst estimates, spurred by the company's addition of 30 stores in the past year to tap the pickup in spending.

The country's exporters have been less successful in exploiting rising demand for commodities such as iron ore, zinc and coal. Mining companies are struggling to overcome congestion at mines, ports and railways, leaving Australia's trade balance in deficit for five years. The monthly shortfall peaked at A$2.4 billion in November 2004.

The trade gap may widen in coming months as Rio Tinto Group and other coal producers using Newcastle, the world's biggest export harbor for the fuel in Australia, are forced to trim loading quotas in the fourth quarter.

In a move to curb vessel lines, producers will be asked to make voluntary cuts, failing which, the reductions will be imposed based on current allocations, Port Waratah Coal Services Ltd. General Manager Graham Davidson said in an interview Sept. 24.

Sales Lost

Producers are losing sales because of the delays caused by insufficient port and rail capacity. Australia may lose as much as A$7.9 billion in export revenue in the next decade if port and rail congestion isn't resolved, according to the Australian Bureau of Agricultural and Resource Economics.

Australia's exports of minerals and energy, such as copper and oil, are expected to be A$112.2 billion in 2007-08, down from the A$117.5 billion forecast in June, the government said last week. Sales of commodities may reach A$144.7 billion in the 12 months ending June 30, lower than its A$149.5 billion estimate earlier this year.

Following is a table of economists' estimates for the August trade balance in Australian dollars:

A$ Mln
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Median -$1400
Average -$1389
High Forecast -$900
Low Forecast -$1800
No. of replies 23
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4Cast -$1650
ABN Amro -$1800
AMP Capital Investors -$900
ANZ Bank -$1400
BT Financial -$1200
Barclays Capital -$1200
Citi -$1800
Commonwealth Bank -$1500
Deutsche Bank -$1100
Goldman Sachs -$1400
Grange Securities -$1200
HSBC Bank Australia -$1603
ICAP Australia -$1400
JPMorgan Chase -$1300
Macquarie Bank -$1400
Merrill Lynch -$900
National Australia Bank -$1400
RBC Capital Markets -$1500
St. George Bank -$1400
TD Securities -$1500
Thomson IFR -$1500
UBS Australia -$1300
Westpac Bank -$1600
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Last Updated: October 1, 2007 10:01 EDT