By Swati Pandey
SYDNEY, Nov 3 (Reuters) - Australia's resource-rich economy likely got a fillip last quarter from resurgent commodity prices as its trade deficit shrank to the lowest in 20 months, and further gains looked likely in coming months.
Thursday's data could bolster views that the Reserve Bank of Australia's (RBA) five-year easing campaign may have ended. The central bank left interest rates at 1.50 percent this month, seemingly content to keep to the sidelines as it took a sanguine view on the economic outlook. from the Australian Bureau of Statistics (ABS) showed exports rose 2 percent, helped by a surge in coal and metal prices, while the trade deficit narrowed to A$1.23 billion compared with expectations of A$1.7 billion.
Spot prices for Australian hard coking coal .PHCC-AUS=SI have jumped 230 percent this year to top $258 a tonne. That is a huge windfall for Australia where coal accounts for a tenth of exports at around A$2.8 billion ($2.1 billion) every month. encouraging to see that the trade deficit narrowed by such a margin," said Savanth Sebastian, economist at CommSec.
"What it highlights is the play around the lift in commodities prices is starting to filter through. It's a positive momentum."
The ABS added that its data did not yet fully reflect the surge in commodity prices, suggesting exports will likely be revised higher, and the deficit lower, in future releases.
Analysts say, if the price increases are sustained, it could help Australia completely wipe out its trade deficit.
The RBA's own index of commodity prices surged further in October, with spot prices for coal, iron ore and LNG implying an increase of over 34 percent on the same month last year.
Australia's A$1.6 trillion economy celebrated 25 years without recession last quarter as growth accelerated to its fastest pace in four years, mainly thanks to a huge contribution from net exports.
However, the performance at home has been patchy. Anaemic inflation and a lacklustre labour market could keep the RBA on notice for further cuts.
Underlying inflation is stuck at a record low of 1.5 percent and seems likely to remain below the RBA's 2 to 3 percent target band for another year or more.
Employment growth has also disappointed in recent months, while being heavily skewed toward part-time jobs.
Futures market 0#YIB: imply at most a 40 percent chance of a cut next year. A Reuters poll of 60 analysts last week found a majority of respondents had expected one more easing to 1.25 percent by mid-2017. risks are around a further rate cut, but we don't expect a move earlier than the second quarter of next year," Sebastian added.