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5302.0 - Balance of Payments and International Investment Position, Australia, Dec 2005  
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DECEMBER KEY FIGURES

Sep Qtr 2005
Dec Qtr 2005
Sep Qtr 2005 to Dec Qtr 2005
$m
$m
% change

TREND ESTIMATES

Balance on current account
-13 368
-13 895
-4
Balance on goods and services
-4 291
-4 148
3
Net income
-8 961
-9 628
-7

SEASONALLY ADJUSTED

Balance on current account
-13 674
-14 447
-6
Balance on goods and services
-4 312
-4 371
-1
Net income
-9 226
-9 958
-8

ORIGINAL

Balance on current account
-15 467
-13 848
10
Balance on capital and financial account
15 903
14 100
-11

Levels at end of period

Net international investment position (IIP)
541 492
560 171
3
Net equity
91 095
87 348
-4
Net debt
450 396
472 823
5

Current Account, Main aggregates - Trend estimates at current prices
Graph: Current Account Main aggregates Trend estimates at current prices

International Investment, Levels at end of period
Graph: International Investment, Levels at end of period



DECEMBER KEY POINTS


BALANCE OF PAYMENTS

  • The current account deficit, seasonally adjusted, rose $773m (6%) to $14,447m. The deficit on the balance of goods and services rose $59m (1%) to $4,371m. The income deficit rose $732m (8%) to $9,958m.
  • In seasonally adjusted chain volume terms there was an increase of $1,022m (9%) in the deficit on goods and services. This could be expected to contribute -0.5 percentage points to growth in the December quarter 2005 volume measures of GDP.


INTERNATIONAL INVESTMENT POSITION
  • Australia's net IIP rose $19b to a net liability of $560b. Net foreign debt was $473b, an increase of $22b, mostly due to net debt inflows of $16b and exchange rate changes of $6b, consistent with the depreciation of the Australian dollar. Net equity liabilities fell by $4b, to $87b.


NOTES

FORTHCOMING ISSUES

ISSUE (QUARTER) Release Date
March 2006 6 June 2006
June 2006 1 September 2006



REVISIONS

Table 36 summarises revisions, in original current price terms, since the last issue of this publication, for the last three years and six quarters.


Incorporation of the latest survey and administrative data has resulted in revisions to the current account back to September quarter 2004, increasing the 2004-05 current account deficit by $41m. The financial account and international investment position have been revised back to September quarter 2004 increasing Australia's net IIP liability as at 30 September 2005 by $2,506m.



FEATURE ARTICLE

This issue contains a feature article, Foreign Ownership of Equity (pages 17-22), which updates the analysis of foreign ownership of equity last published in the September quarter 2004 issue.



CHANGES IN THIS ISSUE

There are no changes in this issue.



INQUIRIES

For further information contact Tom Jebbink on Canberra (02) 6252 5540 for balance of payments estimates, and Wendy Raedt on Canberra (02) 6252 5541 for international investment estimates.



TABLES ON AUSSTATS


TABLES AVAILABLE ON AUSSTATS

Data available free on the ABS web site <www.abs.gov.au> include:

  • longer time series of all tables contained in this publication
  • additional tables as listed below:

51 Balance of payments: summary, original - Financial year


52 International investment position by net foreign equity and net foreign debt - Financial year


53 International investment position by foreign assets by equity and debt - Financial year


54 International investment position by foreign liabilities by equity and debt - Financial year


56 Goods and services: terms of trade, original - Financial year


57 Goods credits: original - Financial year


58 Goods debits: original - Financial year


63 Goods credits: implicit price deflators (Index numbers) - Financial year


64 Goods debits: implicit price deflators (Index numbers) - Financial year


65 Services credits: original - Financial year


66 Services debits: original - Financial year


68 Services credits: chain volume measures and implicit price deflators (Index numbers) - Financial year


69 Services debits: chain volume measures and implicit price deflators (Index numbers) - Financial year


70 Income credits: original - Financial year


71 Income debits: original - Financial year


73 Current transfers: original - Financial year


74 Capital account - Financial year


75 Financial Account - Financial year


76 International investment: Australian investment abroad - Financial year


77 International investment: foreign investment in Australia - Financial year


78 International investment: levels of Australian investment abroad - Financial year


79 International investment: levels of foreign investment in Australia - Financial year


80 International investment: foreign debt levels at the end of period - Financial year


81 International investment: gross external debt liabilities - Financial year


83 Balance of payments: exchange rates - Financial year


84 International investment: foreign assets and liabilities: by Industry - Financial year


85 Balance of payments: ratios of current account measures to GDP - Financial year


89 International investment position: historical summary - Financial year


95 Quarterly combined current price seasonal adjustment factors, September 1959 to June 2006


101 Merchandise exports by SITC division on a Balance of payments basis, chain volume measures


102 Merchandise exports by SITC division on a Balance of payments basis, implicit price deflators


103 Merchandise exports by SITC division and section on a Recorded trade basis, chain volume measures


104 Merchandise exports by SITC division and section on a Recorded trade basis, implicit price deflators


105 Merchandise imports by End-Use categories on a Balance of payments basis, chain volume measures


106 Merchandise imports by End-Use categories on a Balance of payments basis, implicit price deflators


107 Merchandise imports by SITC division and section on a Recorded trade basis, chain volume measures


108 Merchandise imports by SITC division and section on a Recorded trade basis, implicit price deflators


109 Services credits and debits, confidentialised version, chain volume measures


110 Services credits and debits, confidentialised version, implicit price deflators


111 Balance of payments: current account transactions, seasonally adjusted and trend estimates (percentage change) - Quarter


112 Balance of payments: goods and services, implicit price deflators, original (index) - Quarter


113 Balance of payments: original and seasonally adjusted chain volume measures and indexes (percentage change) - Quarter


114 Balance of payments: goods credits, chain volume measures, original - Quarter


115 Balance of payments: goods debits, chain volume measures, original - Quarter


116 Balance of payments: services credits and debits, current prices, original and seasonally adjusted - Quarter


117 International investment: foreign assets, by direction and type of investment - Quarter


118 International investment: foreign liabilities, by direction and type of investment - Quarter


119 International investment: foreign debt transactions - Quarter


120 International investment: interest income on foreign debt - Quarter


214 Balance of payments: goods credits, chain volume measures, original - Financial year


215 Balance of payments: goods debits, chain volume measures, original - Financial year


216 Balance of payments: services credits and debits, current prices, original and seasonally adjusted - Financial year


217 International investment: foreign assets, by direction and type of investment - Financial year


218 International investment: foreign liabilities, by direction and type of investment - Financial year


219 International investment: foreign debt transactions - Financial year


220 International investment: interest income on foreign debt - Financial year



ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

The trend estimate of the balance on current account for the December quarter 2005 was a deficit of $13,895m, an increase of $527m (4%) on the deficit recorded for the September quarter 2005. The main contributors to the increase in the deficit were goods debits which rose $1,108m (3%) and income debits which rose $694m (5%) partly offset by goods credits which rose $1,283m (4%).


In seasonally adjusted terms, the current account deficit rose $773m (6%) to $14,447m between the September and December quarters 2005 where:

  • the net income deficit rose $732m (8%) to $9,958m
  • the net goods deficit fell $177m (4%) to $3,895m
  • the net services deficit rose $236m (98%) to $476m.

Goods and Services

The trend estimate of the balance on goods and services at current prices was a deficit of $4,148m, a decrease of $143m on the September quarter 2005 deficit.


In seasonally adjusted terms, the balance on goods and services was a deficit of $4,371m, an increase of $59m on the September quarter 2005 deficit where:

  • the goods deficit fell $177m (4%) to $3,895m
  • the services deficit rose $236m (98%) to $476m.

The decrease in the goods deficit resulted from higher goods exports, up $2,101m (6%) largely offset by higher goods imports, up $1,924m (5%).


The increase in goods credits was driven by:

  • non-rural goods, up $1,884m (7%)
  • other goods, up $241m (12%)
  • rural goods, down $24m.

The increase in goods debits was driven by:
  • capital goods, up $1,235m (14%)
  • intermediate and other merchandise goods, up $692m (4%)
  • consumption goods, up $214m (2%)
  • other goods, down $217m (14%).

In seasonally adjusted volume terms, the deficit on goods and services was $12,418m, an increase of $1,022m (9%) on the $11,396m deficit recorded in the September quarter 2005. The net deficit on goods rose $909m (9%) to $11,602m. Goods credits rose $673m (2%) while goods debits rose $1,582m (4%). The net services balance was a deficit of $816m, an increase of $113m (16%) on the September quarter 2005 deficit of $703m.


The increase of $1,022m in the deficit on goods and services in volume terms could be expected to make a contribution to growth of -0.5 percentage points in the December quarter 2005 volume measures of GDP, assuming no significant revision to the GDP chain volume estimate for the September quarter 2005.

Goods and Services(a)
Graph: Goods and Services



Goods Credits

The trend estimate of goods credits rose $1,283m (4%) to $37,254m in the December quarter 2005.


In seasonally adjusted current price terms, goods credits rose $2,101m (6%) to $37,543m.


Rural goods (seasonally adjusted, current prices) fell $24m to $6,168m, with volumes down 3% and prices up 2%. Decreases were in:

  • wool and sheepskins, down $41m (6%), with volumes down 3% and prices down 3%
  • meat and meat preparations, down $38m (2%), with volumes down 3% and prices up 1%
  • other rural, down $17m (1%), with volumes down 4% and prices up 3%.

These decreases were largely offset by cereal grains and cereal preparations, up $72m (7%), with volumes up 1% and prices up 6%.


Non-rural goods (seasonally adjusted, current prices) rose $1,884m (7%) to $29,097m, with volumes up 4% and prices up 3%. The largest increases were in:

  • metal ores and minerals, up $922m (15%), with volumes up 14% and prices up 2%
  • metals (excluding non-monetary gold), up $272m (12%), with volumes up 8% and prices up 4%
  • coal, coke and briquettes, up $243m (4%), with volumes down 2% and prices up 6%
  • other non-rural (including sugar and beverages), up $237m (9%), with volumes up 5% and prices up 4%
  • other mineral fuels, up $120m (4%), with volumes up 7% and prices down 3%
  • other manufactures, up $74m (2%), on increased prices.

Other goods (seasonally adjusted, current prices) rose $241m (12%) to $2,278m, driven by a rise in goods for processing, up $147m (79%), largely on increased volumes, and by a rise in non-monetary gold, up $103m (7%) with volumes down 8% and prices up 16%.

General Merchandise Credits(a)
Graph: General Merchandise Credits



Goods Debits

The trend estimate of goods debits rose $1,108m (3%) to $41,007m in the December quarter 2005.


In seasonally adjusted current price terms, goods debits rose $1,924m (5%) to $41,438m.


Consumption goods imports (seasonally adjusted, current prices) rose $214m (2%) to $12,423m, largely due to increased volumes. The largest increases were in:

  • consumption goods n.e.s., up $127m (3%), with volumes up 5% and prices down 2%
  • textiles, clothing and footwear, up $124m (8%), with volumes up 7% and prices up 2%.

Capital goods imports (seasonally adjusted, current prices) rose $1,235m (14%) to $10,146m, with volumes up 12% and prices up 1%. The largest increases were in:
  • civil aircraft, up $916m, largely on increased volumes
  • capital goods n.e.s., up $160m (14%), on increased volumes
  • industrial transport equipment n.e.s., up $140m (11%), on increased volumes
  • telecommunications equipment, up $94m (8%), on increased volumes.

These increases were partly offset by machinery and industrial equipment, down $94m (3%), with volumes down 3% and prices up 1%.


Intermediate and other merchandise goods (seasonally adjusted, current prices) rose $692m (4%) to $17,521m, with both volumes and prices up 2%. The largest increases were in:

  • fuels and lubricants, up $543m (12%), on increased volumes
  • other merchandise goods, up $134m (61%), largely on increased volumes
  • other parts for capital goods, up $81m (3%), with volumes up 1% and prices up 2%
  • organic and inorganic chemicals, up $80m (8%), on increased volumes.

Partly offsetting these increases were falls in:
  • processed industrial supplies n.e.s., down $113m (3%), with volumes down 4% and prices up 1%
  • iron and steel, down $60m (7%), with volumes down 6% and prices down 1%.

Other goods (seasonally adjusted, current prices) fell $217m (14%) to $1,348m, with volumes down 20% and prices up 7%, driven by falls in non-monetary gold and goods for processing.

General Merchandise Debits(a)
Graph: General Merchandise Debits



Services

The trend estimate of net services was a deficit of $395m, a rise of $32m (9%) on the September quarter 2005 deficit of $363m.


In seasonally adjusted terms, net services recorded a deficit of $476m, a rise of $236m on the September quarter 2005.


Services credits, in seasonally adjusted terms at current prices, fell $240m (3%) to $9,179m, largely on reduced volumes. The largest decreases in services credits were in:

  • passenger and other transportation services, down $120m (6%), with volumes down 4% and prices down 2%
  • travel services, down $111m (2%), with volumes down 3% and prices up 1%.

Services debits, in seasonally adjusted terms at current prices, fell $4m to $9,655m, with volumes down 1% and prices up 1%. The largest decreases in services debits were in:
  • travel services, down $28m (1%), with volumes down 2% and prices up 2%
  • other services, down $17m (1%), with volumes down 2% and prices up 1%.

These decreases were largely offset by a rise in transportation services, up $41m (1%), on increased prices.


Seasonally adjusted, tourism related services credits fell $139m (2%) to $5,842m and tourism related services debits fell $10m to $5,151m.


Implicit Price Deflator

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits rose 3.0%. In original terms, it rose by 2.6%. The chain Laspeyres price index for goods and services credits rose 2.5%, indicating that the compositional effects had a small upward influence on the movement in the IPD. The IPD for goods credits rose 3.0% and the IPD for services credits rose 0.3%.


The total goods and services debits IPD rose 0.9% in seasonally adjusted terms. In original terms, it rose by 0.8%. The chain Laspeyres price index for debits rose 0.8%.

IMPLICIT PRICE DEFLATOR(a)
Graph: IMPLICIT PRICE DEFLATOR



Relationship to IPI and EPI

In original terms, the implicit price deflator for total goods exports rose 3.0%. The chain Laspeyres price index for goods exports rose 2.9%. The export price index (EPI) rose 2.2% during the December quarter 2005.


During the December quarter 2005, the goods imports IPD (in original terms) rose 0.7% and the chain Laspeyres price index for goods imports rose 0.7%. The import price index (IPI) rose 0.4%.


Terms of trade

Australia's seasonally adjusted terms of trade rose 2.1% to 121.7, with an increase of 3.0% in the IPD for goods and services credits and a 0.9% increase in the goods and services debits IPD. The trend estimate of the terms of trade increased 2.0% to 121.6.


Income

The trend estimate of the net income deficit rose $667m (7%) to $9,628m.


In seasonally adjusted terms, the net income deficit rose $732m (8%) to $9,958m. Income credits rose $88m (2%) to $5,443m and income debits rose $820m (6%) to $15,401m.


The increase in the seasonally adjusted net income deficit was driven by the continued strength of the resource sector and increased yields on long term debt securities.


In original terms, the net income deficit fell $696m (7%) to $9,208m. Income credits rose $389m (7%) to $5,592m and income debits fell $307m (2%) to $14,800m.

Net Income
Graph: Net Income



Current Transfers

In seasonally adjusted terms, the net current transfers deficit was $118m, a decrease of $18m on the $136m deficit recorded in the September quarter 2005. Current transfer credits fell $2m and current transfer debits fell $20m (2%).



CAPITAL AND FINANCIAL ACCOUNT

Capital Account

In original terms, the capital account surplus was $274m, down $92m on the September quarter 2005 surplus. Capital transfer credits fell $60m (8%) to $663m, while capital transfer debits rose $30m (8%) to $387m.


Financial Account

In original terms, the balance on financial account recorded a net inflow of $13.8b, with a $16.0b inflow of debt and a $2.1b outflow of equity.


Direct investment in Australia recorded an inflow of $4.5b in the December quarter 2005, an increase of $0.2b on the September quarter inflow of $4.3b. Australia's direct investment abroad recorded an outflow of $7.1b, up from the previous quarter's outflow of $7.0b.


Portfolio investment recorded a net inflow of $22.2b, an increase of $15.1b on the net inflow of $7.1b recorded in the September quarter 2005. This increase was partly attributable to debt restructuring and foreign take up of equity issued through public floats by several large companies.


Other investment recorded a net inflow of $4.9b, an increase of $2.0b on the net inflow of $2.9b recorded in the September quarter 2005.


Reserve assets recorded a net outflow of $9.9b, a turnaround of $18.6b on the previous quarter's inflow of $8.6b, due to an increase in foreign exchange reserves.



INTERNATIONAL INVESTMENT POSITION


INTERNATIONAL INVESTMENT

Australia's net international investment position at 31 December 2005 was a net foreign liability of $560.2b, up $18.7b (3.4%) on 30 September 2005. The increase consisted of:

  • net transactions of $13.8b
  • price changes of $4.7b
  • exchange rate changes of $0.4b
  • other adjustments of -$0.3b.

During the December quarter 2005, the level of net debt liabilities rose $22.4b (5.0%) to $472.8b. This comprised net debt raisings of $16.0b, exchange rate changes of $6.0b and price changes of $0.5b.


During the December quarter 2005, the level of net equity liabilities fell $3.7b (4.1%) to $87.3b, reflecting exchange rate changes of -$5.6b, transactions of -$2.1b, other changes of -$0.3b and offset by price changes of $4.2b.



CALENDAR YEAR: 2005 SITUATION


BALANCE OF PAYMENTS

In original terms, the balance on current account was a deficit of $55.1b for the calendar year 2005, an increase of $0.6b (1%), on the deficit recorded for 2004.


The net income deficit increased by $6.7b, from $28.6b in 2004 to $35.2b in 2005. This was offset by a decrease of $6.7b in the net goods deficit from $24.6b in the calendar year 2004 down to $17.9b for the deficit recorded in calendar year 2005. Net services recorded a deficit of $1.5b in the calendar year 2005, an increase of $0.6b on the deficit recorded for 2004.


In 2005, the net income deficit increased $6.7b (23%), with a $2.5b (13%) increase in income credits offset by a $9.1b (19%) increase in income debits. The increase in both income credits and debits was driven by increases in income from direct investment equity and portfolio investment debt.


Goods exports increased $21.1b (18%) and goods imports increased $14.4b (10%). The largest increases in goods exports were in:

  • coal, coke and briquettes, up $8.4b (62%), to $21.9b
  • metal ores and minerals, up $7.2b (43%) to $24.0b
  • other mineral fuels, up $3.0b (32%) to $12.5b.

For imports of goods, the largest increases were in:
  • fuels and lubricants, up $4.3b (34%), to $16.9b
  • processed industrial supplies n.e.s., up $1.5b (11%), to $14.5b
  • non-industrial transport equipment, up $1.3b (11%), to $13.7b
  • machinery and industrial equipment, up $1.2b (10%), to $13.7b.

Services exports rose $1.3b (4%) and services imports rose $1.9b (5%).


In original terms, the balance on financial account recorded a net inflow of $54.6b in 2005, an increase of $1.8b (3%) on the net inflow of $52.9b in 2004. The increased inflow was due to a $25.4b increase in net portfolio investment and a $14.6b increase in other investment. The impact of this increase on the financial account was partially offset by:

  • a decrease of $29.5b in net direct investment, from an inflow of $33.4b to an inflow of $3.9b
  • a decrease of $8.6b in reserve assets, from an outflow of $1.0b to an outflow of $9.6b.


INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position at 31 December 2005 was a net foreign liability of $560.2b. This was up $54.9b (11%) on the position a year earlier as a result of:
  • net transactions of $54.6b
  • price changes of $2.6b
  • exchange rate changes of -$2.4b
  • other changes of $0.1b.

During the 2005 calendar year, the level of net debt rose $52.6b (13%) to $472.8b. This was attributable to net transactions of $52.1b, exchange rate variations of $2.2b and other changes of $0.3b. These increases were partially offset by price changes of -$2.1b. Net equity liabilities rose $2.3b (3%) to $87.3b. This was attributable to net transactions of $2.6b, price changes of $4.6b, offset by exchange rate effects of -$4.6b and other changes of -$0.2b.

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