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Exporters undaunted by slowing China


Australian exporters appear to have so far avoided any significant fallout from slower economic growth in the nation's major trading partner, China.

Far from deteriorating, economists also say Australia's broader trade position is in better shape than it was in the first three months of this year, which should prove a bonus for the June quarter domestic economic growth report.

International trade data from the Australian Bureau of Statistics released on Thursday showed business with China increased by 14 per cent in May, compared to April, driven by a 17 per cent rise in iron ore fines exports.

All up, trade with Australia's main partners in East Asia rose 10 per cent in May, to $26.8 billion.

Trade Minister Craig Emerson said the results again showed the importance of Australia's ongoing close engagement with the Asian region amid continued economic weakness in other parts of the world.

"Australia remains focused on building on and diversifying its trade relationships with the emerging economies of Asia," Dr Emerson said in a statement.

The bureau's data showed a seasonally adjusted $285 million trade deficit in May, about half what had been expected by economists.

While this was larger than the revised deficit in April of just $26 million, it was the second smallest trade gap this year.

The combined $311 million deficit for April and May compares with a trade gap of more than $2.5 billion in the March quarter.

"The better trade balance so far this quarter indicates that after the 0.5 percentage point drag on GDP growth in the (March) quarter, net export volumes are on track to make a positive contribution to growth in the June quarter," National Australia Bank senior economist Spiros Papadopoulos said.

TD Securities strategist Alvin Pontoh said there was "scant evidence" that slower Chinese growth was making a material impact on Australia's export performance.

"The trade deficits since the start of the year have arguably been more a function of lower commodity prices, supply-side disruptions, and volatile items, rather than being driven by a drop in shipment volumes," he said.

Overall, exports grew by two per cent in May compared to April, but were outpaced by imports that rose by three per cent.

This included a three per cent rise in imported capital goods, which now stand 40 per cent higher over the year, the fastest annual pace in around a decade.

Commonwealth Securities economist Savanth Sebastian said Australian businesses had taken advantage of the higher exchange rate to import cheaper capital goods.

"The strength in capital investment at favourable prices has been great news for businesses, ensuring that costs remain subdued while having the ability to drive growth plans over the coming year," Mr Sebastian said.