Figures on Tuesday cast doubt on hopes that foreign trade is driving economic growth.
The data from the Australian Bureau of Statistics showed the trade deficit narrowed in June, after seasonal adjustment, to $1.68 billion from May’s $2.04 billon.
That’s an improvement in the trade balance, but the trade balance isn’t what matters for economic growth, which in turn drives employment.
The trade balance is affected by changes in the prices of imports and exports.
But economic growth is all about the volume of production – how many tonnes of iron ore, bushels of wheat, cups of coffee or taxi rides that are produced, and need people to do the work to produce them.
So the trade balance adjusted for those price changes – the trade balance in real terms – is what matters as far as economic growth is concerned.
The full picture will emerge in the quarterly trade figures, due from the ABS on September 2, to be fed into the GDP estimates the next day.
But we can make a reasonable stab at it in the meantime.
First, the monthly figures show exports of goods and services fell by seven per cent in the June quarter while imports rose by two per cent.
But we have to make an adjustment for price changes.
The ABS publishes an export price index and an import price index.
By those measures, export prices fell by eight per cent in the quarter, while import prices rose three per cent.
Adjusting the quarterly trade values to account for these price changes suggests that exports rose marginally, by less than one per cent, in real terms, while imports rose by more than four and possibly even five per cent.
This rough-and-ready calculation will not predict the final outcome next month with great precision.
The added-up monthly figures are not perfectly aligned with the quarterly numbers.
And the price index data are not compiled in the same way as the quarterly price figures, and don’t cover trade in services.
But it seems very likely that exports were roughly steady while imports rose substantially in the June quarter.
That means Australia’s output of goods and services – GDP – rose by less than total spending.
Or, as economists say, net exports made a negative contribution to economic growth in the June quarter, to the tune of something between 0.5 and 1.0 percentage points.
That’s a significant drag on growth.
Another significant drag – on Monday, the ABS revealed figures showing retail trade fell by 0.2 per cent in real terms in the quarter.
There may be some good news on the way to balance that, but so far the picture of growth in the June quarter is looking pretty bleak.