Australia's trade deficit unexpectedly narrowed in April because exports of grain, coal and gold increased, which will underpin economic growth as consumer spending slows.

The goods and services trade shortfall narrowed to A$1.81 billion (US$1.29 billion) from A$1.99 billion (US$1.41 billion) in March, seasonally adjusted, the Australian Bureau of Statistics said in Sydney. Imports rose 4 per cent and exports increased 6 per cent.

Faster economic growth in Australia's largest trading partners has fuelled demand for commodities and increased earnings at exporters such as BHP Billiton and BlueScope Steel Ltd. Farmers harvested a record wheat crop this year as Australia, the world's second-largest exporter of the grain, recovered from drought.

"Firmer global growth will underpin the export recovery," said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney. "This should see a more significant narrowing in the trade gap over the course of the year."

The median forecast in a Bloomberg News survey of 19 economists was for a A$2 billion (US$1.42 billion) gap.

Economists are counting on a recovery in exports to spur growth this year as consumer spending slows after the central bank increased interest rates late last year. A decline in exports probably helped slow the economic growth rate to 0.7 per cent in the first quarter from the previous three months, according to a Bloomberg News survey of 22 economists yesterday.

"The trade data provides hope that the long-awaited rebalancing of economic growth is under way" with exports helping spur the economy, Adam Donaldson, senior economist at UBS Australia Ltd in Sydney, said in a report.

Japan's economy grew at a 5.6 per cent annual pace in the first quarter, spurred by consumer spending. The US economy grew at a 4.4 per cent. They are Australia's two biggest export markets.

This month, BlueScope Steel, Australia's largest steelmaker, forecast a 22 per cent jump in full-year profit because of a China-led surge in global steel demand. Net income may rise to A$550 million (US$390.50 million) in the year ending June 30, the Melbourne-based company said.

The Australian dollar rose to 71.50 US cents at 4:33 pm yesterday in Sydney from 71.35 US cents before the report. The yield on a benchmark government bond maturing May 2013 was unchanged at 5.86 per cent.

The trade report comes a day before the Reserve Bank of Australia's board meets to review interest rates. The bank will leave the overnight cash rate target unchanged at 5.25 per cent when it announces a decision on Wednesday, according to all 23 economists surveyed by Bloomberg News.

The central bank has kept interest rates unchanged this year following increases in November and December. Signs of a slowdown in the housing market prompted the bank to keep rates steady.

Australia is the world's largest exporter of beef, coal and iron ore. Exports, which make up one-fifth of the economy, rose 6 per cent in April to A$12.45 billion (US$8.84 billion).

Non-rural goods exports, which include gold, iron ore and fuel, increased 6 per cent. Exports of rural goods jumped 13 per cent.

Coal exports climbed 19 per cent from March to A$996 million (US$707 million), and were 9.9 per cent higher than a year earlier, as Xstrata Plc and others exporters of Australian coal benefited from a surge in contract prices.

Xstrata said last month that prices for thermal coal it exports under contract will rise 68 per cent in the year that began April 1.

Australian imports rose 4 per cent in April to A$14.25 billion (US$10.12 billion). Imports of capital goods, which include machinery, vehicles and telecommunications equipment, increased 4 per cent, while imports of consumer goods jumped 5 per cent.

April is the 24th straight monthly trade gap, the worst run of deficits since 33 months of shortfalls between December 1997 and August 2000. The trade balance has been in deficit because of drought and reduced demand from Australia's major trading partners in the past two years.

(China Daily 06/01/2004 page12)