Australia’s Trade Balance deficit widened much more than economists expected in July, showing a shortfall of –A$1.5 billion, the largest in 15 months. Preliminary forecasts ahead of the release had called for a –A$0.9 billion result. The previous month’s reading was also revised down to –A$0.54 billion from the –A$0.44 billion originally reported. The gap expanded as imports surged 4%, driven by a 21% increase in oil shipments. Imports of consumer goods advanced 2%, owing to overseas purchases of vehicles, food, and beverages. Exports fell 1%, led by a hefty 27% drop in cross-border gold sales. On the face of it, the data paints an encouraging picture of the Australian economy: rising oil demand (primarily in the form of industrial fuel and lubricants) points to an increase in production and hints at possible improvement in the employment situation while the increase in consumer demand is good news for the spending climate and thereby overall economic growth. However, not all is as rosy as it seems: much like yesterday’s surprisingly strong second-quarter GDP result, the surge in Australian demand evident in today’s data likely owes the government’s ample fiscal package, including A$20 billion in cash handouts to households and A$22 billion in infrastructure spending. Indeed, as we have previously suggested, the big question going forward will be whether the now buoyant Australian economy can maintain momentum once the flow of stimulus cash dries up.
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