Australia’s deficit of investment in trade infrastructure

Time for Prime Minister Rudd (wee!) to get to work,

Australia has ratified the Kyoto Protocol. Prime Minister Kevin Rudd signed the instrument of ratification of the Kyoto Protocol in his first act after being sworn in this morning.

He said the Federal Government would do everything in its power to help Australia meet its Kyoto obligations, including setting a target to reduce emissions by 60 per cent on 2000 levels by 2050.

It also would establish a national emissions trading scheme by 2010 and set a 20 per cent target for renewable energy by 2020.

No no, not the feelgood-but-ultimately-incomplete Kyoto accords (although it is nice to leave the US to its pariah status, alone); the trading scheme is a better move, though.

No, I meant all that stuff we dig out of the ground, on which we’re struggling to make money because we can’t get it out of the bloody country in time.

Australia recorded its largest ever monthly trade deficit in October as supply bottlenecks choked off mining exports, while strong domestic demand sucked in imports.

Exports fell 3.4 percent compared to September, with metal ores and minerals down 20 percent, metals off 22 percent and coal falling 11 percent.

In contrast, imports climbed 2.3 percent with higher oil prices causing the biggest dent in the trade balance.

While the boom in commodity prices of recent years has greatly boosted Australia’s earnings from its resource exports, the country has struggled to boost output, in part due to rail and port bottlenecks.

A lingering drought has cut into farming shipments while a rising Australian dollar has hurt by making exports more expensive to foreign buyers, as many commodity goods are priced in a falling U.S. dollar.

That in turn was pressuring profit margins. A separate report from the government on Monday showed company profits fell 2.1 percent after tax in the third quarter, a surprise to analysts who had looked for a 2.0 percent increase.

Mining was again the main culprit with gross profits falling a steep 11.6 percent in the quarter, while manufacturing suffered a 4.5 percent drop.

Eco 1 students, pay attention:

Firms also added to inventories at a faster pace than expected, with a 1.3 percent increase to $113 billion. That was likely to add around 0.3 percentage point to gross domestic product (GDP) in the quarter, when most analysts had looked for a neutral impact. The GDP numbers are due on Wednesday.

“The strong growth in inventories will obviously push up GDP in the quarter,” said Rob Henderson, chief economist markets at nabCapital. “It looks like it has added to the view that we’re going to see strong GDP in the quarter.”

See how GDP can increase, based on things nobody has bought (yet)?

This is not the first time we’ve seen this problem hurt our balance of payments, either. Being prejudiced against the former (yay!) Prime Minister and his ultimately, proven, cowardly Treasurer, however, I can be optimistic that, perhaps, something can be done about this before the commodities boom is over. It would be no end of frustrating if, with hundreds of ships lined up outside our ports, we missed our boat.

So. Time for our more/actually aware and adaptive new Prime Minister (hooray!) to focus the attention of his government on Australia’s flagging productivity.


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