Coal supply issue hits exports - economists

Australia's trade deficit widened in March after flooding and industrial action held back coal exports, economists say.

The balance on goods and services was a deficit of $1587 million in March, seasonally adjusted, the Australian Bureau of Statistics said today.

Exports rose 2.0 per cent for the month while imports were up 5.0 per cent, the data showed.

Commonwealth Bank senior economist John Peters said flooding across eastern states during the summer months and industrial action at central Queensland mines had affected the supply of coal during the month.

"We're seeing some negative impact from that which is holding back exports," he said.

He said the high value of the Australian dollar and the importing of capital goods from overseas to service the boom in mining investment had lifted imports.

However, he said Australia was likely to move back into a trade surplus once supply issues with the coal sector were sorted out.

"The demand is still there and we expect to move back into trade surpluses later in the year."

HSBC chief economist Paul Bloxham said the consistent deficit trend would contribute to weaker growth in the near term.

"The overall balance is not too far off the expectation, but it is disappointing that we've been in deficit for the whole of the last quarter," he said.

"I think the main story here is that we're likely to see a subtraction from exports in the first quarter, which is a downside risk to first quarter growth in the economy.

"To some degree we're also seeing rebalancing in the economy - the traded side had been contributing more, and yesterday we saw that the housing numbers have levelled out a bit, and retail numbers have picked up."

Mr Bloxham said that falling commodity prices would pose a challenge for trade in reaching surplus again, but said that exports would be likely to pick up.

"I think the export story for Australia in the medium term is going to be a positive one - we're investing a huge capacity into it, but month to month, it can be volatile, due to weather conditions,"

The trade data would probably vindicate a recent 50-point rate cut from the Reserve Bank of Australia, Mr Bloxham said.

"This is a contributor to softer growth in the first quarter, and will probably validate the RBA's moves so far," he said.

"However, taken together with yesterday's data, the fact that retail and housing numbers are improving will probably give them comfort."