Australia's current account: Export volumes bounce back, post disruptions – Westpac

Australia's current account deficit (CAD) widened in mid- 2017, partially reversing recent improvements, notes Andrew Hanlan, Senior Economist at Westpac.

Key Quotes

“The CAD was $9.6bn in the June quarter, a $4.8bn deterioration on March. As a share of the economy, the quarterly deficit was 2.1% of GDP. That is still well below the 4% average post 1990 but is up from the 2016 Q4 figure of 0.8%, the smallest deficit since the end of 1979.”

“The key development was a dip in global commodity prices, -6.4% in the quarter, easing from recent highs.”

“Export earnings contracted by 2.8% in the June quarter, with prices falling by 5.4%. The import bill rose by 1.8%, including a 0.6% lift in prices.”

“The terms of trade declined by 6.0% in the quarter, reversing a 5.7% rise in March. In 2016, the terms of trade rose 17.3%, giving a significant boost to national income.”

“The trade balance shrank in Q2 from $7.4bn to $3.0bn, or from 1.7% of GDP in March (the largest trade surplus since 1973) to 0.7% of GDP in June.”

“In terms of output, the latest update was a positive one, with export shipments rebounding from temporary weather disruptions early in the year.”

“Export volumes increased by 2.7% in Q2, after a 2.2% decline in Q1, to be 4.3% above the level of a year ago. Import volumes advanced further, to meet rising demand, up 1.2% in Q2, to be 6.5% higher over the year.”

“Net exports added 0.3ppts to Q2 growth, after a hefty 0.9ppt subtraction in Q1.”

“The net income deficit has widened since mid-2016 as foreign investors receive higher returns, particularly in the mining sector. The income deficit was $12.6bn in June, up a little from $12.2bn in March and up materially from $8.5bn this time a year ago.”