Commerzbank’s Volkmar Baur reports that Australian exports fell 2% year-on-year in March, with iron ore shipments down about 18% due to a pricing dispute with a Chinese state-owned buyer. He notes that the current account deficit has widened sharply and, given Australia’s commodity dependence and China’s domestic problems, this could remain a headwind for the Australian Dollar.

Export slump deepens current account deficit

"Australian exports fell by 2% year-over-year in March. A pricing dispute between an Australian iron ore exporter and a Chinese state-owned import company resulted in iron ore exports being approximately 18% below the previous year’s level."

"At the same time, the rise in natural gas prices in March does not yet appear to have affected exports, as these too were down year-over-year."

"As a result, Australia’s current account balance deteriorated in the first quarter, falling deeper into deficit at AUD -27 billion."

"Although gross domestic product figures will not be released until tomorrow, if analysts’ estimates regarding the expected 0.5% quarter-over-quarter GDP growth are to be believed, this would result in a current account deficit of 3.7% of GDP - the highest level in about 10 years."

"Australia’s heavy reliance on commodity exports, with China as its primary buyer, could continue to pose a problem for the Australian dollar as long as China’s domestic economic issues persist."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)