Australia export prices boast biggest jump since 2010

[SYDNEY] Australia's export prices boasted the biggest rise in over six years last quarter as everything from iron ore to coal and liquefied natural gas enjoyed double digit gains, a welcome windfall for profits, incomes and tax receipts.

Friday's data from the Australian Bureau of Statistics showed export prices surged 12.4 per cent in the fourth quarter, from the third quarter, to also be up 12.4 per cent on the year.

Import prices edged up just 0.2 per cent, implying the terms of trade - the ratio of export prices to import prices - jumped by more than 13 per cent in the quarter, easily one of the largest on record.

The recovery in prices has already rewarded the country with its first trade surplus in almost three years in November, and another is a near certainty for December.

All that cash will flow from mining profits to wages, employment and the tax take. BHP Billiton, for instance, is expected to report an increase of 35-40 per cent in earnings when it releases half-year results next month.

That is a major reason the Reserve Bank of Australia (RBA) has turned more optimistic on the economic outlook in the last couple of months, and why markets see only a small chance of another cut in interest rates after two easings in 2016.

Neither, though, is there much likelihood of a hike given figures this week showed underlying inflation stayed around record lows of 1.5 per cent last quarter.

Other data out on Friday showed producer prices remained historically subdued last quarter with a rise of just 0.5 per cent even as petrol costs leaped.

COAL AND IRON

Leading the trade bonanza for Australia has been the value of its two biggest export earners, iron ore and coal. The price received for coal rose almost 60 per cent in the fourth quarter, with metal ores up over 11 per cent.

The RBA's index of commodity prices, which mirrors the country's resource mix, surged 11.8 per cent in November and another 9.3 per cent in December.

That left the index up almost 40 per cent on a year earlier, while bulk commodities alone were 85 per cent higher.

While coal prices have eased somewhat since, iron ore has topped US$80 a tonne for the first time since Oct 2014 by one measure MYSTL-RIIOI-IMP .

The ore has been supported by strength in steel prices as China shutters inefficient plants. Steel capacity in the Asian giant fell by 10 million tonnes in 2016, and a further 6 million tonnes are due to be cut this year.

Australian miners are also moving more of the product. Shipments to China from Port Hedland terminal hit a record 37.4 million tonnes in December, boosted by expansions at BHP and Fortescue Metals Group.

That bodes well for a revival in real economic growth in the fourth quarter, a much-needed fillip after the shock 0.5 per cent drop in GDP suffered in the previous quarter.

REUTERS