Australian trade: First deficit since late 2017 amid booming tech investment Down Under

Australia has posted its first trade deficit in almost a decade amid booming spending on data centres, a fuel shock and a stronger flow of foreign investment into the country.

The quarterly deficit was $2.4 billion according to data from the Australian Bureau of Statistics released on Tuesday, ending nearly nine years of consecutive surpluses.

It was expected to modestly slow the country’s economic growth figures, which will be released on Wednesday.

Trade deficits were a hot political issue Down Under in previous decades though most economists generally play down their significance.

Deficits on the country’s current account — which includes exports and imports with the rest of the world — are generally believed to be driven by investment flows, rather than a country’s competitiveness in trade.

The latest data showed foreign investment into Australia on the rise thanks partly to strong offshore demand for local debt. The value of Australian-owned shares overseas dropped due to the rising Aussie dollar.

“Volatility in overseas equity markets and exchange rate movements due to the Middle East conflict reduced the value of Australian superannuation investment in overseas equity,” ABS head of international statistics Jonathon Khoo said.

Imports for data centre equipment hit a record, up 75 per cent for the quarter to almost $8b. The AI-driven splurge lifted business investment in figures released last week that some analysts compared to the mining boom.

“(Automatic data processing) equipment imports reached historic highs, led by bulk imports of AI server racks amid continued data centre infrastructure investment in New South Wales and Victoria,” Mr Khoo said.

“Crude oil and refined petroleum product prices rose significantly as the closure of the Strait of Hormuz lifted oil prices and tightened global supply.”

Rocketing gold sales remained significant with exports rising 23.7 per cent. That was the 10th straight quarterly increase for both imports and exports of the precious metal.

Resources companies sent more of their profits to investors overseas, too.

“Foreign-owned mining companies in Australia saw higher profits this quarter due to price rises in gold, and profits paid back to foreign owners and shareholders,” Mr Khoo said.