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Trade Deficit Widened to $2.6 Billion, The Australian Bureau of Statistics Said

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Core prompt: The trade deficit for November widened to $2.6 billion, from $2.4bn in October, the Australian Bureau of Statistics said. That was the biggest monthly shortfall since March 2008 and wider t

The trade deficit for November widened to $2.6 billion, from $2.4bn in October, the Australian Bureau of Statistics said. That was the biggest monthly shortfall since March 2008 and wider than analysts' expectations of $2.3bn.

At 5pm AEDT yesterday, the dollar was buying $US1.0482, up just US0.1c.

Some economists said the monthly trade figures did not capture a recent strong recovery in export volumes and revenues for industrial commodities such as iron ore and coal, predicting that the trade deficit would narrow in coming months.

"The prospect of better trade numbers in coming months will have limited Australian dollar bearishness. The Australian dollar looks well supported overall but $US1.0525/30 remains decent resistance for now," Westpac Bank strategists said in a note.

Still, other analysts said it would take a sustained recovery in commodity prices for the central bank to end a year-long campaign of interest rate cuts designed to cushion the economy from a fading mining boom.

"Our forecasts for Australia this year present a picture of slowing domestic demand and the need for further Reserve Bank of Australia interest rate cuts to help rebalance the economy," Citi economists said in a research note.

The central bank last month cut its benchmark lending rate by 25 basis points to 3 per cent, matching a low reached in 2009 in the aftermath of the global financial crisis.

In the latest sign that activity outside of the mining industry remains weak, a private sector gauge yesterday showed that Australia's construction sector contracted for the 31st consecutive month in December.

The Performance of Construction Index, published by the Australian Industry Group and Housing Industry Association, rose 1.8 points from November to 38.8, but remains below the key index level of 50 that indicates construction activity is expanding.

Analysts have not yet estimated the economic impact of bushfires raging across Australia's south and east, home to some of the richest farmland and tourist attractions.

Australia has been hit by a spate of extreme weather in recent years. In 2009, 173 people were killed by bushfires that swept across Victoria, while Queensland was hit hard by flooding and cyclones in 2011.

 
 
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