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Australia recorded a trade deficit in January, its first in 11 months, as weaker shipments of iron ore and coal contributed to the biggest drop in total exports in almost three years. The local currency fell.

Imports outpaced exports by A$673 million ($715 million), from a revised A$1.33 billion surplus in December, the Bureau of Statistics said in a report in Sydney today. It was the biggest shortfall since March 2010. The median estimate in a Bloomberg News survey of 24 economists was for a surplus of A$1.5 billion.

The data add to pressure on Reserve Bank of Australia Governor Glenn Stevens to end a two-month pause in interest-rate cuts after the economy slowed last quarter and payrolls fell in February. The currency has strengthened this year on a A$456 billion pipeline of resource projects driven by companies such as BHP Billiton Ltd. (BHP) Today’s report showed exports to China, which accounts for about a quarter of Australia’s merchandise sales abroad, fell by 23 percent.

“The numbers are pretty soft and consistent with our view that Chinese growth is going to be a fair bit weaker in the first half of the year than the second half,” said Ben Jarman, a Sydney-based economist at JPMorgan Chase & Co. (JPM), who cautioned data can be volatile due to the Lunar New Year holiday. “Today’s report shows why the RBA needs to maintain its conditional easing bias.”

Currency Drops
The local dollar fell to as low as $1.0617 from $1.0641 immediately before the data were released. It bought $1.0630 at 12:41 p.m. in Sydney. The world’s fifth-most traded currency has strengthened about 4 percent this year against its U.S. counterpart.

Today’s report showed Australia’s two-way trade weakened in January with each of the nation’s top four trading partners -- China, Japan, the U.S. and South Korea. Exports to Japan sank 16.5 percent, according to the report.

Total coal exports in January declined 5.6 percent and iron ore was down 23 percent, it showed.

Total exports plunged 8 percent to A$25.4 billion in January, led by a 56 percent decline in non-monetary gold, a 15 percent fall in metal ores and minerals, and a 9 percent drop in coal, coke and briquettes, today’s report showed.

Imports declined 1 percent to A$26 billion on an 18 percent drop in fuels and lubricants, it showed.

Annette Beacher, the Singapore-based head of Asia-Pacific research at TD Securities Inc., said she is taking the report “with a complete grain of salt” because of holidays in Asia at the start of the year.

‘Caution’
“Anything to do with China in January, when Chinese New Year fell, I’m treating with caution,” she said. “I’m going to wait for February before I panic.”

Stevens lowered the overnight cash rate target twice late last year to 4.25 percent. He paused last month and again on March 6, while noting that policy makers have scope to lower borrowing costs as Europe remains a potential source of shocks “for some time yet.”

China is Australia’s biggest trading partner and its demand for iron ore, coal and energy drove the nation’s terms of trade, or export prices relative to import prices, to a record last year.

The trade report capped a week of weaker-than-forecast economic figures in Australia, which avoided a recession during the 2009 global contraction and where the benchmark interest rate is the highest among major developed economies.

Slowing Growth
Gross domestic product in the final three months of 2011 grew 0.4 percent from the third quarter, half the expansion economists predicted, a government report showed March 7. Household consumption, which accounts for 56 percent of GDP, advanced at the slowest pace since the first quarter of 2010.

Business profits unexpectedly dropped in the three months through December by the most in two-and-a-half years as earnings weakened at mining and financial companies. Gross operating profits fell 6.5 percent in the fourth quarter to A$66.3 billion from the previous three months, when they rose a revised 4.7 percent, a government report showed March 5.

Yesterday, a Bureau of Statistics report showed Australian employers cut payrolls by 15,400 jobs in February and the unemployment rate rose for the first time since August, to 5.2 percent.

RBA Deputy Governor Philip Lowe said earlier this week that the labor market is one of the key indicators the central bank is monitoring for how the economy is managing the “historically unusual” structural change.

“Over the next few years, mining-sector investment will reach new highs as a share of GDP, and is likely to account for around 40 percent of total business investment,” Lowe said in the March 7 speech. “Structural change is also clearly evident in the export numbers, with resources now accounting for around 60 percent of total exports, up from 35 percent a decade ago.”