Australia's current account: Net exports detract, export shipments decline - Westpac

Andrew Hanlan, Senior Economist at Westpac, explains that Australia's current account deficit narrowed to $3.1bn in the March quarter, a $0.4bn improvement on December.

Key Quotes

“The trade surplus increased from $6.1bn to $9.2bn with export earnings boosted by higher commodity prices. The net income deficit widened from $9.6bn to $12.4bn, in part due to increased returns to foreign investors in the resource sector.”

“The current account deficit (CAD), as a share of the economy, was 0.7% of GDP in the March quarter. That is the smallest deficit since December 1979 and a sharp improvement on a deficit of 5.6% of GDP at the end of 2015. The annual CAD is 1.9% of GDP, the first sub-2% result since 1980.”

“Export earnings increased by 5.2% in the quarter, +$4.9bn to $98.2bn, on higher prices, +7.0%qtr. The import bill rose by 2.0%, +$1.7bn to $88.9bn, on higher volumes and a small rise in prices, +0.4%.”

“The terms of trade increased by 6.6% in the March quarter to be 24.8% above the level of a year ago. The rebound in the terms of trade follows four years of decline from 2012 to 2015: -11.7%; -0.4%; -10.7% and -12.5%. Higher prices received for our exports is providing a significant boost to national income. Although, the jump in commodity prices is likely to be relatively short lived.”

“Real net exports made a sizeable detraction from Q1 GDP growth of 0.7ppts, with export volumes declining by 1.6% and import volumes advancing further, up 1.6%. Over the past year, net exports subtracted 0.4ppts from growth, the first annual negative since mid 2012.”

“Export volumes contracted in the March quarter in part due to weather disruptions impacting shipments. Resource exports fell by a sharp 4.6%.”

“The net income deficit was 2.8% of GDP in March 2017, a deterioration on a 1.6% deficit in December, which was the smallest net income deficit since 1984.”