Australia Current Account Surplus Soars to 2nd Highest on Record: Can It Last?


On the strength of liquified natural gas(LNG), Australia's current account surplus surged to the 2nd highest on record.

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.

Trade Diversion

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.

Economic Collapse

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

Comments (2)

Aside from political noise, the combination of more effective means of extracting shale gas, and the increased concern/worry/hype about health effects of burning coal, should be a positive for the entire LNG value chain, on a more long term basis.

No. 1-2

Where subsidies are concerned the US is no better than the EU and they, the EU, are finally beginning to realize that subsidies in today's world don't work. In the meantime, of course China will continue to buy US soybeans after all, its the US taxpayer who is contributing to China's cheap soybean bonanza. For all the Trump free trade rhetoric don't you think the US situation is anomalous?

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