Australia Current Account Surplus Soars to 2nd Highest on Record: Can It Last?
A couple of Tweets will help explain the surge.
Will It Last?
Let's take a diversion for a second to understand the importance of my question.
The Financial Times reports US-China tariff war will divert trade to EU, says UN
The FT notes that Brazil replaced the US as the main supplier of soybeans to China. Mexico and the EU are even bigger beneficiaries.
"Vietnam, Australia, Brazil and India are also expected to benefit from export gains, worth about 3.5 per cent or more of their total exports."
OK, I accept that. But how long will that last?
Trump China Deal
I am making some assumptions here, but I presume there will be a deal between the US and China. If so, soybean exports will undoubtedly shift back to the US from Brazil.
What else might we see?
How about LNG that Trump wanted to sell to Europe?
Will that go to the US?
Perhaps not, because I am making an assumption the the US can deliver this output.
Third, and most worrying for Australia is the implied assumption that Australia's economy will not totally collapse. If that happens, imports could drop substantially even as LNG and other exports continue.
Australia's primary imports are machinery and transport equipment, computers and office machines, telecommunication equipment, crude oil, and petroleum products.
If the price of crude plunges and there is a business collapse, all bets are off.
So, let's not over-emphasize the alleged "strength" of the current state of affairs.
Mike "Mish" Shedlock