Australia Q3 Terms of Trade To Fall For Second Straight Qtr

--Both Export, Import Price Indexes Fall in Q3

     SYDNEY (MNI) -  - International trade price indexes for the third quarter

released by the Australian Bureau of Statistics on Thursday.

                      Import Price Index  Export Price Index

------------------------------------------------------------

                                % Change            % Change

                                      Q3                  Q3

Quarter-over-quarter                -1.6                -3.0

MNI median                          -2.0                -3.5

Year-over-year                      -0.4               +14.2

     FACTORS: The export price index fell for the second consecutive quarter,

leading to a slowing in the year-on-year rise to +14.2% in Q3 from +22.5% in Q2.

The 14.2% y/y rise was the smallest of the gains posted in the last four

quarters but was still better than the 10 quarters of y/y falls prior to that.

In the latest quarter, coal and related products led the fall with a 7.4% q/q

decline, following my metalliferous ores and scrap, which eased 1.5%. The rise

in the Australian dollar during the quarter was one of the reasons for the fall,

particularly of non-monetary gold which fell 3.2%. Petroleum, petroleum products

and related materials fell 5.8%, following a 4.4% fall in Q2 as increased supply

entered the global market. Meat and meat preparations fell 3.4%, driven by falls

in beef prices due to improved domestic and global supply.

     The import price index fell for the second straight quarter, mainly driven

by lower prices for telecommunications and sound recording equipment, which

dropped 7.8%. Among other items, electrical machinery and related product prices

fell 1.4%.

     TAKEAWAY: The outcome was close to MNI median forecast and points to second

straight quarterly fall in terms of trade. Westpac economists had forecast a

2.0% q/q decline in the import price index and a 3.2% fall in export price

index, and based on that they forecast a fall in terms of trade for goods of

slightly more than 1%. Their forecast assumes a positive impact from terms of

trade for services.

     Overall the data is in line with the Reserve Bank's forecast in August that

Australia's terms of trade are likely to decline over the forecast period, but

to remain above their trough in early 2016.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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