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Surging commodity prices will deliver a trade surplus

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Australia’s skyrocketing export earnings paint a better picture of the country’s economic position than predictions of an impending tough budget, a leading economic consultancy has said. "With the world licking its lips for our resources, our export earnings are-and will be-through the roof," predicted Deloitte Access Economics director and economic forecaster Chris Richardson. The March Business Outlook report released by Deloitte Access Economics suggests surging commodity prices will deliver more than double the $9 billion lost to recent natural disasters during the coming year. It comes as Wayne Swan warned Australians they couldn’t expect "a repeat of the rivers of gold that flowed into the Government coffers in the last mining boom". However Richardson believes the Government’s predictions of economic doom and gloom are just "scene-setting", and rising commodity prices will actually make it easy for the Government to return the budget to surplus. "The floods and cyclone cost us a lot. But at the same time as we were worrying about the floods and cyclone and the earthquakes and the tsunami, the world prices for what we sell were sharply rising; the impact on our nominal gross domestic product in the year ahead is $20 billion," he added. "That $20 billion flows from just a few months’ worth of commodity prices rises; the world is now begging us to grow faster." While the short-term economic outlook is good, Richardson warned economic growth is slow and labour is in short supply, particularly for labour-dependent commodity industries. "Demand pressures are already rising at a time when spare capacity is modest, while the weakness in productivity gains means labour cost growth is travelling faster than inflation." The Australian appetite for imports is also expected to increase, meaning the predicted trade surpluses won’t last forever.

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