SYDNEY: Australia's trade deficit blew out to more than $2 billion in August, data showed yesterday, with exports diving as China's slowdown hit the key mining sector, increasing pressure on the economy.
The Aus$2.027 billion ($2.073 billion) deficit reported by the Australian Bureau of Statistics was triple the Aus$685 million forecast by analysts and reflected a three percent drop in exports driven by sagging resources demand.
It is the worst monthly result since March 2008.
The value of metal ore and mineral shipments fell by seven percent on-month to Aus$6.216 billion, largely in the iron ore and copper sectors, with coal, coke and briquettes down 11 percent to Aus$3.012 billion.
Plunging prices were the primary driver, with the cost of iron ore lump down two percent and iron ore fines down six percent from the previous month. Steelmaking and thermal coal prices each dipped three percent on-month.
It was the third consecutive month of price falls for the major commodities.
The conservative opposition seized on the figures as proof that new taxes on coal and iron ore profits were harming Australia's economic prospects.
But Prime Minister Julia Gillard rejected the claims as "nonsense" and said it was "wrong and inappropriate for anybody to be talking the Australian economy down".
She told reporters: "We came out of the global financial crisis strong — we saved 200,000 jobs, we didn't have a recession, we have an economy... that is expected to grow by about three percent in the coming year.
"We have got a resources boom where we are yet to see the investment peak and the production peak."
Australia's central bank on Tuesday slashed interest rates to their lowest level since the global financial crisis, shaving 25 basis points off the official cash rate to 3.25 percent owing to the softening economic outlook.
The Reserve Bank of Australia noted China's slowdown and said the boom in mining investment in Australia was expected to peak next year, with serious ramifications for the wider economy. China is Australia's top trading partner.
Australia's growth has already cooled, halving from 1.4 percent in the first quarter of 2012 to 0.6 percent in the three months to June.
Its links to resilient Asia helped Australia dodge recession during the financial crisis — the only advanced economy to do so — but analysts have warned that over-reliance on China in particular could now be a liability.
Australia slashed its mining export forecasts for 2012-13 by 10 percent last month, tipping earnings to fall for the first time since the global downturn as prices for coal and iron ore plunge 27-28 percent.
Resources firms including BHP Billiton and Fortescue have recently shelved or scaled back projects in Australia due to worsening industry conditions and mining minister Martin Ferguson has warned the boom days are over.