Current account balance June quarter falls well beyond estimates
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The news: Australia’s current account balance fell by $4.4 billion to a deficit of $10.7 billion in the June quarter 2024, well above average estimates of a $5.9 billion deficit, according to seasonally adjusted figures from the Australian Bureau of Statistics (ABS).
The numbers: The quarter's deficit is the largest since the June quarter in 2018 due to the continued falls in bulk commodity prices and higher income paid to non-residents.
The balance on goods and services fell $3.9 billion to $12.0 billion, while the net primary income deficit rose $0.5 billion to $22.5 billion.
Exports of goods fell 4.4%, with lower prices for iron ore and coal driving the decrease. Iron ore and coal prices saw a second quarterly fall, which was reflected in goods export prices 5.4% lower compared to the same time last year.
Exports of cereal grains and cereal preparations also fell due to reduced Australian wheat production in the 2023-24 season following record highs in the last two seasons, ABS said.
Exports of services, up 6%, partly offset the fall in goods exports, led by education-related travel services. This was driven by an increased average spend by non-residents following two consecutive quarters of weakness.
Imports of goods fell 0.6% driven by capital goods, reflecting fewer imports of mining equipment. Imports of services rose 1.1% following two consecutive quarterly falls. This was driven by an increase in imports of "other services" with rises across a range of categories. ABS said imports of travel services also increased with Australians travelling for longer and spending more.
Australia’s terms of trade fell 3% from last quarter and was down 3.8% from June quarter 2023. The quarterly fall in the terms of trade largely reflected a fall in export prices (-3%), with imports prices remaining unchanged.
The net primary income deficit of $22.5 billion widened for the second consecutive quarter, as primary income debits were higher than income credits. Growth in debits came from higher interest payments on Australia’s debt liabilities, as well as a rebound in dividends paid to overseas portfolio investors.
The financial account had a surplus of $9.4 billion, driven by net inflows of debt ($9.1 billion) and net inflows of equity ($0.2 billion).
Net international investment liability position was down $21.3 billion to $720.0 billion. The total, which represents the amount that Australia owes to the rest of the world, fell to its lowest level since June quarter 2009. This was primarily due to Australia’s net foreign equity assets rising by $35.1 billion to $546.5 billion, reflecting continued growth in overseas equity markets.
Rising values in international share markets benefited Australian equity investment, notably the assets of Australian superannuation funds, ABS said. This was partly offset by Australia’s net foreign debt liabilities which grew by $13.8 billion to $1,266.5 billion as domestic borrowers sought additional funding in overseas debt markets.
The $1.1 billion rise in net trade is expected to contribute 0.2 percentage points to the June quarter 2024 Gross Domestic Product (GDP) movement.
The source: ABS media release
