New figures suggest Australian exporters are enjoying the fruits of an Asian ‘dining boom’, replacing the nation’s income diet of a ‘mining boom’.
While iron ore and coal export prices took a bit of a hit during the June quarter, beef export prices soared seven per cent and there were also healthy price gains for dairy, cereal and fish products.
“Australia’s high-quality food products are in high demand from the rising middle classes of Asia, boosting fortunes of regional Australia,” Commonwealth Securities chief economist Craig James said.
“The ‘dining boom’ is continuing to replace the ‘mining boom’.”
However, this positive news came as China imposed a temporary ban on beef imports after raising concerns about the labelling of some recent shipments from six Australian processors, putting hundreds of millions of dollars at risk.
The Australian Bureau of Statistics’ trade prices indexes released on Thursday showed overall the Australia’s terms of trade or national income declined during the June quarter.
Export prices dropped 5.7 per cent in the quarter – albeit still 22.5 per cent up on the year – while import prices eased only 0.1 per cent.
Economists estimate the terms of trade eased between 4.5 and six per cent in the quarter after rising by 6.6 per cent in the March quarter.
Iron ore prices tumbled 14.6 per cent and coal prices dropped by 7.7 per cent during the quarter.
The decline from a four and a half year high in the terms of trade wasn’t too surprising after Australia recorded one the biggest back-to-back gains on record over the December and March quarters.
JP Morgan economist Ben Jarman said commodity prices have been particularly choppy over the past year, but he is expecting a decent rise in the terms of trade in the September quarter given iron ore prices have been on the rise again in recent months.
Mr James agrees an income bounce is possible given the iron ore price is around nine per cent higher than the average in March, while coal prices are up 10 per cent.
However, exporters and businesses are concerned about the renewed strength of the Australian dollar after it breached 80 US cents on Wednesday for the first time in over two years.
Australian Industry Group chief executive Innes Willox said while there is no magic dollar value that is perfect for all Australian business, almost 90 per cent of manufacturers say they can compete in export markets if the Aussie dollar is 80 US cents or less.
“The higher dollar also adds unavoidable costs to many businesses at a time when rising energy costs are cutting deeply into margins,” Mr Willox said.
“Governments need to redouble their efforts to agree on policies that will put downward pressure on energy costs that are eye-wateringly high to help mitigate to dollar cost impact.”