The big thing that has been mentioned by the RBA and economic commentators as potentially leading to a hike in rates is our trade position. Surges in commodity prices could mean that money coming into Australia from exports would far outweigh money going out due to imports, providing a big stimulus to our economy. The extra money sloshing around could put upward pressure on inflation they implied and therefore rates. Well yesterday we got the 'mother of all trade figures' so to speak. Australia recorded a record trade surplus for June of $3.54bn
This surplus was driven by a 7% surge in exports while imports were flat. The export surge reflected strongly rising commodity prices but also higher export volumes, especially for coal. NAB's expectations are for exports to continue to outstrip imports but as the investment boom gains momentum in 2011 imported capital equipment will cut into the surpluses.
It remains to be seen how quickly this surplus will feed through into inflation but a November rate hike, if not before, is a very real possibility.
