Australian Exports to China Hit Record, Boost Growth
Australian exports to China jumped to a record high in March as miners shipped a lot more iron ore, a sign of resilient demand in the Asian giant and a big positive for economic growth at home.
The strength of exports could even lean against the need to cut interest rates at the Reserve Bank of Australia's (RBA) monthly policy meeting, which is due to conclude at 0430 GMT on Tuesday.
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The figures from the Australian Bureau of Statistics showed exports to China totaled an unadjusted A$7.4 billion ($7.6 billion) in March, up 17 percent on the previous month and no less than 23 percent on March last year.
Much of the improvement came in iron ore as exports of the steel-making mineral were up as much as 36 percent by volume.
The pick up in exports helped return Australia's trade account to surplus to the tune of A$307 million, ending 14 months of deficits and well above market expectations.
The turnaround for the whole quarter was even more dramatic, with the seasonally adjusted trade deficit shrinking to just A$306 million, from A$5.3 billion in the last quarter of 2012.
That in turn implied net exports, or exports minus imports, likely made a sizable contribution to economic growth in the first quarter, perhaps of half a percentage point or more.
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Combine that with strong growth in real retail sales in the quarter, and gross domestic product (GDP) could have expanded by a full percentage point or more.
"We've been forecasting a rise of 1 percent in GDP, but that might be low now," said Kieran Davies, an economist at Barclays.
"Mining output is clearly picking up and consumers are responding to rate cuts already delivered. It makes us doubt why the RBA would want to cut rates today."
Financial markets are pricing around a 50-50 probability the cash rate will be cut by a quarter point to a record low of 2.75 percent this week, in large part due to concerns about the global outlook.
Analysts are more circumspect, with 18 in a Reuters poll expecting no change and just four calling for a cut.