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5302.0 - Balance of Payments and International Investment Position, Australia, June 2011 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 06/09/2011   
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

In original current price terms, the June quarter 2011 current account deficit was $5,276m, a decrease of $5,114m (49%) on the March quarter 2011 deficit.

Current account balances, in seasonally adjusted and trend terms at current prices, are shown in the following table.

BALANCE ON CURRENT ACCOUNT IN CURRENT PRICES - June Quarter 2011

Change in:
Current prices
Current prices
Current prices
$m
$m
%

Seasonally Adjusted

Balance on current account
-7 419
3 696
33.3
Balance on goods and services
5 599
2 852
103.8
Net goods
8 083
3 461
74.9
Net services
-2 483
-608
-32.4
Net primary income
-12 499
870
6.5
Net secondary income
-519
-26
-5.3

Trend

Balance on current account
-8 829
-75
-0.9
Balance on goods and services
4 778
-465
-8.9
Net goods
7 137
-34
-0.5
Net services
-2 359
-431
-22.4
Net primary income
-13 107
385
2.9
Net secondary income
-500
6
1.2




VOLUMES AND PRICES

Goods and Services

In seasonally adjusted chain volume terms, the balance on goods and services was a deficit of $10,224m, an increase of $1,643m (19%) on the March quarter 2011 deficit of $8,581m.

The net deficit on goods increased $336m (11%) on the March quarter 2011 deficit of $3,066m. Goods credits increased $1,838m (3%) and goods debits increased $2,174m (3%). The net deficit on services increased $1,307m (24%) on the March quarter 2011 deficit of $5,515m.

The increase in the balance on goods and services deficit, in seasonally adjusted chain volume terms, is expected to detract 0.5 percentage points from growth in the June quarter 2011 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the March quarter 2011.

GOODS AND SERVICES, CHAIN VOLUME MEASURES (a)
Graph: GOODS AND SERVICES, CHAIN VOLUME MEASURES (a)



Terms of Trade and Implicit Price Deflator

Australia's seasonally adjusted terms of trade on net goods and services rose 5.4% to 122.6 with an increase of 5.4% in the implicit price deflator (IPD) for goods and services credits while the IPD for goods and services debits remained steady at 85.4. In trend terms, the terms of trade rose 3.4% to 121.7. The June quarter 2011 terms of trade, in both trend and seasonally adjusted terms, were the highest result on record.

IMPLICIT PRICE DEFLATOR AND TERMS OF TRADE (a)
Graph: IMPLICIT PRICE DEFLATOR AND TERMS OF TRADE (a)



Goods

The trend estimate of net goods at current prices was a surplus of $7,137m, a decrease of $34m on the March quarter 2011 surplus of $7,171m.

In seasonally adjusted terms at current prices, net goods recorded a surplus of $8,083m, an increase of $3,461m (75%) on the March quarter 2011 surplus of $4,622m.

GOODS, Price and volume analysis: Seasonally Adjusted - June Quarter 2011

Change in:
Current prices
Current prices
Chain volume measures
Implicit price deflators
$m
%
%
%

Exports
5 645
9.5
3.0
6.3
Rural goods
884
11.7
9.4
2.1
Non-rural goods
5 023
10.5
2.8
7.4
Net exports of goods under merchanting
36
53.7
52.3
1.3
Non-monetary gold
-298
-8.0
-9.8
2.0
Imports
2 185
4.0
3.4
0.5
Consumption goods
-445
-2.8
-1.0
-1.8
Capital goods
212
1.6
5.8
-4.0
Intermediate and other merchandise goods
2 315
9.3
4.7
4.4
Non-monetary gold
101
9.6
6.1
3.3




Services

SERVICES, Price and volume analysis: Seasonally Adjusted - June Quarter 2011

Change in:
Current prices
Current prices
Chain volume measures
Implicit price deflators
$m
%
%
%

Exports
192
1.5
0.3
1.3
Manufacturing services on physical inputs owned by others
6
14.0
14.6
0.5
Maintenance and repair services n.i.e.
2
25.0
12.5
0.5
Transport
-6
-0.4
-0.6
0.2
Travel
141
1.8
0.3
1.6
Other services
49
1.5
0.5
1.0
Imports
800
5.5
7.6
-1.9
Manufacturing services on physical inputs owned by others
-1
-
-
-
Maintenance and repair services n.i.e.
79
109.7
115.1
-2.8
Transport
237
6.5
6.3
0.2
Travel
431
6.7
9.4
-2.5
Other services
54
1.3
4.1
-2.8

- nil or rounded to zero (including null cells)



GOODS CREDITS

The trend estimate of goods credits at current prices rose $1,495m (2%) to $63,744m in the June quarter 2011.

In seasonally adjusted terms at current prices, goods credits rose $5,645m (9%) to $65,084m, with volumes up 3% and prices up 6%.


Rural Goods

Exports of rural goods, in seasonally adjusted terms at current prices, rose $884m (12%) to $8,461m, with volumes up 9% and prices up 2%. The main components contributing to the increase were:
  • other rural, up $598m (19%), with volumes up 14% and prices up 5%
  • cereal grains and cereal preparations, up $318m (18%), with volumes up 17% and prices up 1%.


Non-rural Goods

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $5,023m (10%) to $53,089m, with volumes up 3% and prices up 7%. The main components contributing to the increase were:
  • coal, coke and briquettes, up $3,090m (36%), with prices up 35%
  • metal ores and minerals, up $1,582m (8%), with volumes up 6% and prices up 2%
  • other mineral fuels, up $679m (11%), with volumes up 5% and prices up 6%.
SELECTED MAJOR COMMODITIES, CURRENT PRICES(a)
Graph: SELECTED MAJOR COMMODITIES, CURRENT PRICES(a)



Net Exports of Goods Under Merchanting

Net exports of goods under merchanting, in seasonally adjusted terms at current prices, rose $36m (54%) to $103m, with volumes up 52% and prices up 1%.


Non-monetary Gold

Exports of non-monetary gold, in seasonally adjusted terms at current prices, fell $298m (8%) to $3,431m, with volumes down 10% and prices up 2%.


GOODS DEBITS

The trend estimate of goods debits at current prices rose $1,529m (3%) to $56,607m in the June quarter 2011.

In seasonally adjusted terms at current prices, goods debits rose $2,185m (4%) to $57,002m, with volumes up 3% and prices up 1%.


Consumption Goods

Imports of consumption goods, in seasonally adjusted terms at current prices, fell $445m (3%) to $15,327m, with volumes down 1% and prices down 2%. The main component contributing to the decrease was non-industrial transport equipment, down $800m (19%), with volumes down 19%. This decrease follows the Japanese earthquake and tsunami in March 2011 which, in particular, impacted the imports of passenger motor vehicles.

Partly offsetting this decrease were:
  • textiles, clothing and footwear, up $159m (8%), with volumes up 11% and prices down 3%
  • food and beverages, mainly for consumption, up $135m (6%), with volumes up 6%.


Capital Goods

Imports of capital goods, in seasonally adjusted terms at current prices, rose $212m (2%) to $13,447m with volumes up 6% and prices down 4%. The main components contributing to the increase were:
  • machinery and industrial equipment, up $244m (6%), with volumes up 9% and prices down 2%
  • capital goods n.e.s., up $154m (6%), with volumes up 10% and prices down 4%.

Partly offsetting these increases were:
  • industrial transport equipment n.e.s., down $165m (9%), with volumes down 8% and prices down 2%
  • telecommunications equipment, down $161m (9%), with volumes down 6% and prices down 4%.


Intermediate and Other Merchandise Goods

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $2,315m (9%) to $27,078m, with volumes up 5% and prices up 4%. The main components contributing to the increase were:
  • fuels and lubricants, up $1,494m (18%), with volumes up 5% and prices up 13%
  • other parts for capital goods, up $212m (6%), with volumes up 10% and prices down 3%
  • iron and steel, up $163m (19%), with volumes up 16% and prices up 2%.


Non-monetary Gold

Imports of non-monetary gold, in seasonally adjusted terms at current prices, rose $101m (10%) to $1,149m, with volumes up 6% and prices up 3%.


SERVICES

The trend estimate of net services at current prices was a deficit of $2,359m, an increase of $431m (22%) on the March quarter 2011 deficit of $1,928m.

In seasonally adjusted terms at current prices, net services recorded a deficit of $2,483m, an increase of $608m (32%) on the March quarter deficit of $1,875m.


Services Credits

Services credits, in seasonally adjusted terms at current prices, rose $192m (2%) to $12,766m with prices up 1%. The main components contributing to the increase were:
  • travel, up $141m (2%), with prices up 2%
  • other services, up $49m (2%), with volumes up 1% and prices up 1%.

In seasonally adjusted terms, tourism related service credits rose $140m (2%) to $8,544m.


Services Debits

Services debits, in seasonally adjusted terms at current prices, rose $800m (6%) to $15,249m,with volumes up 8% and prices down 2%. The main components contributing to the increase were:
  • travel, up $431m (7%), with volumes up 9% and prices down 3%
  • transport, up $237m (7%), with volumes up 6%.

In seasonally adjusted terms, tourism related service debits rose $564m (7%) to $8,579m.


PRIMARY INCOME

The trend estimate of the net primary income deficit at current prices decreased $385m (3%) in the June quarter 2011 to $13,107m.

In seasonally adjusted terms, the net primary income deficit decreased $870m (7%) in the June quarter 2011 to $12,499m.

NET PRIMARY INCOME
Graph: NET PRIMARY INCOME



Primary Income Credits

Primary income credits, in seasonally adjusted terms at current prices, increased $557m (6%) to $10,468m. The main contributors to the increase were:
  • a $450m (17%) increase in portfolio investment assets, investment income on equity and investment fund shares
  • a $191m (6%) increase in direct investment assets, income on equity and investment fund shares.

These increases were partly offset by:
  • a $103m (4%) decrease in portfolio investment assets, interest
  • a $31m (7%) decrease in compensation of employees.


Primary Income Debits

Primary income debits, in seasonally adjusted terms at current prices, decreased $313m (1%) to $22,967m. The main contributors to the decrease were:
  • a $384m (11%) decrease in portfolio investment liabilities, investment income on equity and investment fund shares
  • a $129m (2%) decrease in portfolio investment liabilities, interest.

These decreases were partly offset by a $211m (2%) increase in direct investment liabilities, income on equity and investment fund shares.


SECONDARY INCOME

The trend estimate of net secondary income deficit at current prices, decreased $6m (1%) in the June quarter 2011 to $500m.

In seasonally adjusted terms, the net secondary income deficit at current prices, increased $26m (5%) in the June quarter 2011 to $519m.


FINANCIAL ACCOUNT

The balance on financial account, in original terms, recorded a net inflow of $5.1b, with a net inflow of $3.8b of equity and a net inflow of $1.3b of debt.

The financial account surplus decreased $5.4b from $10.5b in March quarter 2011 to $5.1b in June quarter 2011.

Direct investment recorded a net inflow of $18.3b in June quarter 2011, an increase of $14.5b from the net inflow of $3.8b in March quarter 2011, where:
  • direct investment liabilities recorded an inflow of $14.8b, an increase of $10.8b on the inflow of $4.0b in March quarter 2011
  • direct investment assets recorded an inflow of $3.5b, a turnaround of $3.6b on the outflow of $0.2b in March quarter 2011.

Portfolio investment recorded a net outflow of $3.7b, an increase of $2.7b on the net outflow of $1.0b in the March quarter 2011. This was driven by:
  • equity and investment fund shares recording a net outflow of $9.5b
  • debt securities recording a net inflow of $5.8b with portfolio investment liabilities debt securities decreasing $5.4b from $18.9b in the March quarter 2011 to $13.5b in the June quarter 2011.

Financial derivatives recorded a net outflow of $4.2b, a decrease of $2.4b from the net outflow of $6.5b in the March quarter 2011. The main contributor was deposit-taking corporations, except the central bank with a net outflow of $6.1b.

Other investment recorded a net inflow of $1.0b, a decrease of $6.6b from the net inflow of $7.6b in the March quarter 2011.

Reserve assets recorded a net outflow of $6.4b, a turnaround of $13.0b from the net inflow of $6.6b in the March quarter 2011.


INTERNATIONAL INVESTMENT POSITION


ANALYSIS

Australia's net international investment position at 30 June 2011 was a net foreign liability of $781.1b, down $1.2b on the 31 March 2011 position of $782.3b.

The changes contributing to this result are shown in the following table.

INTERNATIONAL INVESTMENT POSITION, Summary - June Quarter 2011

Net international investment position
Net foreign equity
Net foreign debt
$m
$m
$m

Position at beginning of period
782 294
107 702
674 592
Changes in position reflecting
Transactions
5 063
3 772
1 290
Price changes
-5 430
-11 580
6 150
Exchange rate changes
510
8 186
-7 676
Other adjustments
-1 316
-1 951
635
Total changes
-1 173
-1 572
399
Position at end of period
781 121
106 130
674 991




SUPPLEMENTARY INFORMATION


CONDITIONS

The conditions in the global economy showed moderate increases for most countries in the June quarter 2011. According to the Organisation for Economic Cooperation and Development (OECD), preliminary real GDP estimates in seasonally adjusted terms showed positive quarterly growth for: Korea (0.8%), USA (0.3%), total EU (0.2%), UK (0.2%) and Germany (0.1%).

Australia's international investment activities increased substantially during the quarter:
  • foreign asset transactions were -$4.8b in the March quarter 2011 and -$29.5b in the June quarter 2011
  • foreign liability transactions were $15.2b in the March quarter 2011 and $34.6b in the June quarter 2011.

The Australian share market, as measured by the MSCI global index, decreased 4.7% in June quarter 2011, a turnaround of 7.0% on the 2.3% increase in March quarter 2011. There were decreases in most major markets: Canada (-6.1%), Switzerland (-3.2%), Japan (-2.5%), Singapore (-2.1%), USA (-0.3%). Market increases were seen in: New Zealand (2.4%), Germany (1.8%), Europe ex UK (0.8%) and UK (0.6%). A market price change of $18.2b was recorded for foreign equity assets and -$29.7b in foreign equity liabilities during June quarter 2011.

According to Reuters, the composite corporate benchmark yield decreased in the UK (4.72% to 4.60%), US (4.19% to 4.00%), Germany (4.16% to 3.90%) and Japan (1.50% to 1.40%). Long term government bond yields decreased in all major markets over June quarter 2011. The 10 year government bond yields decreased from 3.69% to 3.38% in the UK, 3.47% to 3.18% in the US, 3.35% to 3.01% in Germany and 1.26% to 1.14% in Japan. In Australia, the rate decreased from 5.44% to 5.16%. This is reflected in the market price changes for both portfolio debt securities liabilities ($5.7b) and assets (-$3.9b) in the June quarter 2011.

The Australian dollar appreciated against a number of the major currencies in the June quarter 2011. It appreciated against the US dollar (3.9%), Swedish krona (3.8%), UK pound sterling (3.8%), Canadian dollar (3.5%), Chinese renminbi (2.5%), European euro (1.3%) and Japanese yen (0.9%). The Australian dollar depreciated against the Swiss franc (-5.9%) and New Zealand dollar (-4.7%). The Trade Weighted Index (TWI) recorded an increase of 2.0%. The net impact of exchange rate changes was a decrease of $15.4b on foreign assets and $14.9b on foreign liabilities position.


RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 1)

In original terms, the IPD for total goods credits rose 2.8% and the chain Laspeyres price index for goods exports rose 3.2%. The export price index (EPI) rose 6.0% during the June quarter 2011.

In original terms, the IPD for total goods debits rose 0.1% and the chain Laspeyres price index for goods imports rose 0.7%. The import price index (IPI) rose 0.8% during the June quarter 2011.

Differences between the IPD and International Trade Price Indexes can arise due to a number of methodological factors including differences in pricing points, timing, coverage and weights. In the June quarter 2011, the difference between the IPD and EPI was mainly due to the metals (excl. non-monetary gold) and metal ores and minerals components.

GOODS AND SERVICES, Price comparison - June Quarter 2011

Seasonally adjusted
Original
Implicit price deflators
Implicit price deflators
International Trade price indexes(a)
Chain Laspeyres price indexes
%
%
%
%

Exports
Goods
6.3
2.8
6.0
3.2
Services
1.3
1.3
na
0.8
Imports
Goods
0.5
0.1
0.8
0.7
Services
-1.9
-1.9
na
-1.8

na not available
(a) Source: International Trade Price Indexes, Australia (cat. no. 6457.0)

IMPLICIT PRICE DEFLATORS AND INTERNATIONAL TRADE PRICE INDEXES
Graph: IMPLICIT PRICE DEFLATORS AND INTERNATIONAL TRADE PRICE INDEXES



Commodity Price Indexes

The RBA Commodity Price Index(footnote 2) (average monthly index) for rural commodities decreased 6.9% between the March 2011 and June 2011 quarters while the EPI for rural goods total increased 4.3%.

The RBA Commodity Price Index for non-rural commodities increased 7.0% while the EPI for non-rural goods total (excluding non-monetary gold) increased 6.6%.

Differences between the RBA Commodity Price Index and ABS price measures are largely a consequence of methodological differences used in the construction of the respective indexes, including coverage of included commodities and timing of source data.


FINANCIAL YEAR 2010-11 SITUATION


CURRENT ACCOUNT

In original terms, the balance on current account for 2010-11 was a deficit of $33.6b, a 37% decrease on the deficit of $53.3b recorded for 2009-10. The balance on goods and services surplus was a record high at $20.8b, a turnaround of $24.8b on the deficit of $4.0b recorded in 2009-10. Goods credits increased $44.9b (22%) with volumes up 1%, and goods debits increased $14.3b (7%) with volumes up 9%.

The 2010-11 services deficit of $6.9b was an increase of $5.8b on the deficit of $1.1b in 2009-10.

The 2010-11 net primary income deficit increased $4.6b (10%), with an increase in primary income credits of $5.1b (14%) and an increase in primary income debits of $9.7b (11%).

The 2010-11 secondary income deficit increased $0.5b (31%), with a decrease in secondary income credits of $0.4b (6%) and an increase in secondary income debits of $0.1b (1%).


FINANCIAL ACCOUNT

The balance on financial account recorded a net inflow of $33.5b, with a net inflow on debt of $36.6b and a net outflow on equity of $3.0b. This result was down $20.7b on the net inflow of $54.3b recorded for the previous year as a result of:
  • a decrease of $37.6b on the net inflow on portfolio investment
  • a decrease of $25.0b on the net outflow on other investment
  • a turnaround of $9.1b to the net outflow on reserve assets
  • an increase of $2.9b on the net inflow on direct investment
  • an increase of $1.9b on the net outflow on financial derivatives.


INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position as at 30 June 2011 was a net foreign liability of $781.1b. This was up $4.3b (1%) on the position a year earlier as a result of:
  • net transactions of $33.5b
  • exchange rate changes of $27.1b
  • price changes of -$51.0b
  • other changes of -$5.3b.

During 2010-11, Australia's net foreign equity liability increased to $106.1b, up $13.6b (15%) on the previous financial year, with exchange rate changes of $76.2b partially offset by price changes of -$52.3b, other changes of -$7.2b and net transactions of -$3.0b.

Australia's net foreign debt liability fell to $675.0b, down $9.4b (1%) on the previous financial year, with exchange rate changes of -$49.1b partially offset by net transactions of $36.6b, other changes of $1.9b and price changes of $1.3b.

At 30 June 2011, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 31 March 2011 using current prices) was 57.2%. This compares with 60.5% one year ago and 51.2% one decade ago.

1 In this commentary movements in indexes are based on data to four decimal places. <back
2 For RBA Commodity Price Index methodology, see paragraph 23 of the Explanatory Notes. <back

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