The Australian Bureau of Statistics (ABS) revealed on Thursday that the country's trade surplus in July barely made it to the $2 billion mark, sharply detracting from the $3.438 billion surplus posted in the prior month and way below the $3.1 billion previously projected by most economists.

The steep decline, according to economists, were instigated by Australia's dipping commodity exports to China and India and influenced a bit by the country's decision to purchase six super Hornets for the Department of Defence, further pushing down the July surplus to $1.888 billion.

Figures furnished by ABS showed that coal and iron ore exports to China and India went down by 77 percent and 47 percent respectively in July with JP Morgan Economist Helen Kevans explaining that the big slide was surprisingly "a bigger narrowing of the surplus than expected."

Ms Kevans added that the one-off purchase of military aircrafts resulted to the soaring numbers on the import side of the balance ledger while on the other hand, "we did see a sharp pullback in exports of our key commodities, and that's going to be at play for the next few months."

ABS said that the country's import numbers for July peaked to $477 million following the plane acquisition as exports during the same period slumped by a seasonally adjusted four percent while imports inched up a bit by two percent.

Ms Kevans said that commodity prices have been sliding over the past few months, as shed cited that contracts sealed with lower spot prices were now reflecting the declining export numbers, which could be sustained for the next few months and further chipping away some numbers from the surplus results.

The ABS July data also showed that overall exports to both China and India had retreated by 7.8 percent and 26.9 percent respectively in the month though the figures were still high when compared to export figures to posted last year for the two countries.

ANZ economist Riki Polygenis said that the dwindling export demand was largely caused by the 40 percent closure of China's steel industry as she pointed out that "the trade balance is now half what it was in June. It was largely driven by a fall in resource exports, particularly in coal and iron ore."

Nomura Australia chief economist Steven Roberts added that the county's exports would remain volatile for some time due to the constant price and volume adjustments each month as he stressed that July saw "the volumes of the key commodities came back, non-rural exports came back six per cent in the course of the month and led to that fall in the side of the trade surplus."

Despite the slide, Mr Roberts said that the surplus achieved in July was still a huge trade surplus and more should come in the months to come as he predicted that the dismal but negligible numbers were not alarming enough to sway the Reserve Bank of Australia (RBA) from veering away to its intention of opting for a pause on rates movement through the end of 2010.