Australia's trade surplus hit a record $5.7 billion in May after a $925 million monthly rise driven entirely by iron ore exports to China.
The $5.75 billion surplus was up 19 per cent in seasonally adjusted terms, the Australian Bureau of Statistics said on Wednesday, and it handily beat expectations of a $5.25 billion surplus.
CommSec chief economist Craig James said that, from Australia's standpoint, "conditions have never been better" when it comes to global trade.
Exports and imports to China were at record highs in May, as were exports to Japan, and the balance on services - such as tourism and education - were strong, with surplus in trend terms in May for the first time in 15 and a half years, Mr James said.
The surprisingly strong rise is fuelling increased government revenues from taxes on mining companies and could put a federal budget surplus within reach a year early, according to Westpac economist Andrew Hanlan.
Overall, seasonally adjusted exports were up four per cent for the month to $41.6 billion, while imports increased one per cent to $35.8 billion.
The major reason for the $925 million increase was iron ore, with the value of metal ore and minerals exports jumping by $1.3 billion, or 13 per cent, to $11 billion.
Iron ore exports to mainland China rose by $1 billion, while iron ore exports to Japan were up by $222 million.
While iron ore prices have spiked this year, the data indicated that increased volume was far more of a factor in May's rise than higher realised prices.
Lump iron ore exports were up by $455 million, with quantities up 19 per cent and unit values up two per cent.
Iron ore fines were up $822 million, with quantities up 11 per cent and unit values up four per cent.
"Although we expect iron ore volumes to decline over the coming year, we expect iron ore prices to remain elevated, helping maintain Australia's strong surplus over the coming months," ANZ economists Hayden Dimes and Felicity Emmett wrote in a research note.
Exports of hard coking coal - the kind used in steelmaking - were up $477 million, with quantities up 25 per cent and unit values down three per cent.
China accounted for $262 million of that rise, or 58 per cent, with exports to Belgium, India and the Netherlands also all up, by between $133 million and $117 million.
Exports of thermal coal - used to generate electricity - were down by $29 million, with increased exports to South Korea failing to outweigh a drop in exports to Japan.
Imports of civil aircraft were up 67 per cent, or $269 million, and machinery imports were up by five per cent, or $108 million.
J.P. Morgan analyst Tom Kennedy called the stronger iron ore export volume "an encouraging development for real GDP".
Mr Hanlan at Westpac noted the increased exports would be boosting mining profits and in turn tax revenues, providing the federal government with fiscal flexibility.
"There is the possibility that the Federal underlying cash balance edged into surplus in the 2018/19 financial year - one year ahead of schedule and the first surplus since 2007/08, ahead of the impact of the GFC," Mr Hanlan wrote.
Mr James said the positive data could make the Reserve Bank reluctant to "rush" with a third interest rate cut, on top of the second one it handed down on Tuesday.
He said Western Australia was seeing the fruits of the mining investment boom, with an extra $30 billion in export income generated over the past year.News Source: 7News