On the strength of liquified natural gas(LNG), Australia's current account surplus surged to the 2nd highest on record.

A couple of Tweets will help explain the surge.

Australia posts its 2nd largest trade surplus ever. Slide in imports drove the m/m rise but export details are encouraging, with bulk commodities firm, rural exports +7% and only volatile gold (-$1bn!) producing the overall -2% on exports #ausbiz pic.twitter.com/KeKfapdHFf

— Sean Callow (@seandcallow) February 5, 2019

Just making the point, yet again that LNG exports remain the key driver for Australia's trade surplus. 12m rolling sum of LNG exports total A$43bn up 100%3myy. Coal up 20%3myy. Iron ore up 13%3myy. 12m sum LNG exports on track to crack A$50bn in Q2 this year? pic.twitter.com/zMEH47HeiM

— Robert Rennie (@Robert__Rennie) February 5, 2019

Will It Last?

Let's take a diversion for a second to understand the importance of my question.

Trade Diversion

The Financial Times reports US-China tariff war will divert trade to EU, says UN

The FT notes that Brazil replaced the US as the main supplier of soybeans to China. Mexico and the EU are even bigger beneficiaries.

"Vietnam, Australia, Brazil, and India are also expected to benefit from export gains, worth about 3.5 per cent or more of their total exports."

OK, I accept that. But how long will that last?

Trump China Deal

I am making some assumptions here, but I presume there will be a deal between the US and China. If so, soybean exports will undoubtedly shift back to the US from Brazil.

What else might we see?

How about LNG that Trump wanted to sell to Europe?

Will, that go to the US?

Perhaps not, because I am making an assumption the US can deliver this output.

Economic Collapse

Third, and most worrying for Australia is the implied assumption that Australia's economy will not totally collapse. If that happens, imports could drop substantially even as LNG and other exports continue.

Australia's primary imports are machinery and transport equipment, computers and office machines, telecommunication equipment, crude oil, and petroleum products.

If the price of crude plunges and there is a business collapse, all bets are off.

So, let's not over-emphasize the alleged "strength" of the current state of affairs.