The trade deficit for February came in at $2.8 billion, which suggests an annualised trade deficit of about 3 per cent of GDP, and a current account deficit of maybe 7 per cent of GDP. All the export growth was in the rural sector (mostly coal I guess, though I haven’t checked yet.
There are two broad explanations of this. One is that foreignrs see huge investment opportunities that will enable us to expand exports greatly some time in the future. Given the stagnation of manufacturing exports and the fact that there’s no particular reason to think that we are getting drastically better in service areas like tourism, the only plausible growth area is yet more coal.
The alternative is that we’re relying on hot money that can be pulled out quite rapidly when sentiment about the English-speaking countries sours. At that point, we’ll need to turn the trade deficit into a surplus, pronto. As those who’ve experienced such adjustments can attest, this is likely to be a painful process.
I favour the second explanation, but we’ve maintained these deficits for a decade or more, with the obvious blowout confined to the past few years. So we’ll just have to wait and see.