BEIJING, April 6 -- Australia's trade deficit in February narrowed more than expected as exports rose to the second highest on record, driven by increased sales of farm goods plus rising tourism earnings.

    The deficit narrowed to A$2.18 billion (US$1.6 billion), a five-month low, from a revised A$2.27 billion (US$1.7 billion) in January, the Australian Bureau of Statistics said in Sydney yesterday. Exports gained 1 per cent, the third monthly increase. Imports rose 0.4 per cent. Central bank Governor Ian Macfarlane has been counting on rising exports to fuel growth in Australia's A$798 billion (US$609 billion) economy as home building falls and consumer spending slows.

    Increased demand for exports will drive earnings at companies including Queensland Sugar Ltd and may add to expectations the central bank will raise interest rates today.

    "This provides backing to the view that even if consumer spending is slowing, higher exports and investment will compensate," Michael Every, senior economist at RBC Capital Markets, said in Sydney.

    "A further 25 basis point rate rise still looks likely."

    The central bank's board met in Sydney on Monday. Eighteen of 23 economists surveyed by Bloomberg News forecast the bank will raise the overnight cash rate target a quarter point to 5.75 per cent when it announces a decision today.

    The bank raised the rate for the first time in 15 months in March to 5.5 per cent. Exports rose in February to A$13.67 billion (US$10.43 billion), the highest since September 2000. Exports of rural goods, such as meat, sugar, wheat and wool, surged 7 per cent.

    Exports of services, which includes tourism spending, rose 2 per cent. Exports of non-rural goods, which include metals and minerals, declined 1 per cent from January.

    "It's a little better than expectations and that hopefully is a growing trend that we will have a better export performance in Australia," Ian White, managing director of Queensland Sugar, said in an interview from Brisbane.

    "There's certainly a very definite expectation that there will" be a rate increase this week, White said.

    "If there is one now, I think it would probably be the last," he said. Queensland Sugar is the nation's largest exporter of the sweetener.

    The median forecast in a Bloomberg News survey of 21 economists was for a A$2.6 billion (US$1.9 billion) trade deficit.

    The Australian dollar bought 76.53 US cents at 4:33 pm in Sydney from 76.57 US cents before the report was released. The yield on the 6.25 per cent bond maturing in April 2015 was unchanged at 5.61 per cent.

    "It seems that net exports might make a small positive contribution to gross domestic product growth in the first quarter," Stephen Koukoulas, chief Asia-Pacific strategist at TD Securities Ltd, said in Sydney.

    "If so, it will be the first contribution to GDP in three years from net exports and will be a welcome offset to the marked slowing in domestic demand."

    (Source: China Daily by Victoria Batchelor)