The deficit ballooned to A$19.75 billion ($13.04 billion US) in the financial year to June, compared with the previous year's relatively modest shortfall of A$1.65 billion dollars.
Treasurer Peter Costello blamed the deterioration in the international trade ledger on the impact of the worst drought in a century and said there would be no change until the global economy picked up.
"You won't see a big turnaround in the export story until one, the economies of our trading partners pick up so that they have the capacity to buy more of our goods and services and two, the drought breaks, allowing our farmers to get back to full production," Costello told reporters.
Analysts said the problem was exacerbated by a rising local currency and increased spending on imports in the face of a global slowdown.
They said Australia moved further into the red as the year progressed, with a record quarterly deficit of A$6.87 billion dollars in the three months to June.
Some analysts are beginning to ring alarm bells.
"What it means is that growth in that June quarter is going to struggle to make it to positive territory. We see it at only 0.2 or 0.3 percent (down from 0.7 percent in the March quarter)," said Westpac chief economist Bill Evans.
Evans said the Australian dollar, up more than 15 percent against the US currency this year so far, had cut into demand for Australia's commodity and tourism exports.
But the war on Iraq and the Severe Acute Respiratory Syndrome (SARS) crisis also hit tourism.
Meanwhile rural exports were down 15.6 percent for the year because of the drought. But overall exports fell 3.3 percent over the year while imports rose 8.5 percent.
"We've had a lot stacked up against us," Evans said.
BT Economics chief economist Chris Caton said there was little Australia could do about its widening trade deficit.
"Large trade deficits will continue, although the trend should begin to improve in the near future. The deficit should not be considered as a constraint on macro-economic policy making."
|"We've had a lot stacked up against us." |
Bill Evans, Westpac chief economist
Caton did not expect the central Reserve Bank's board to change interest rates at its meeting next week.
On a monthly basis, the deficit rose five percent to A$2.067 billion in June, the third highest monthly figure on record but below analysts' expectations of A$2.2 dollars.
The ABS said a 63 percent fall in automotive gasoline exports and a 21 percent decline in offshore sales of transport equipment contributed to the drop in exports.
‘Beginning of the end’
This was partly offset by a two percent recovery in travel services, which Costello singled out as a source of optimism.
"That may be the beginning of the end of the SARS effect, which would be a positive thing for our tourism industry," he said.
Evans said a slowdown in the Australian economy was likely to be short-lived as domestic activity remained strong and international conditions appeared to be brightening.
"We're seeing a better outlook for the US economy; obviously the SARS effect is behind us and tourism arrivals have started to recover, so looking forward we would expect this drag from exports to be reduced and a strong domestic economy will ensure we have reasonably strong growth," he said.
The Australian government expects economic growth of 3.0 percent in fiscal 2002/03 and in May lowered its growth outlook for fiscal 2003/4 by 0.75 of a point to 3.25 percent due to uncertain international conditions.