5302.0 - Balance of Payments and International Investment Position, Australia, Mar 2018 
Quality Declaration
Quality Declaration ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 05/06/2018
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ANALYSIS AND COMMENTS
In seasonally adjusted current price terms, the March quarter 2018 current account deficit was $10,469m, a fall of $4,192m on the December quarter 2017 deficit. In trend current price terms, the March quarter 2018 current account deficit was $12,229m, a fall of $441m on the December quarter 2017 deficit. The contributors to the current account balance, in seasonally adjusted and trend terms at current prices, are shown in the following table.
TERMS OF TRADE(footnote 1) Australia's seasonally adjusted terms of trade on net goods and services for the March quarter 2018 rose 3.3% to 119.3, with an increase of 4.8% in the implicit price deflator (IPD) for goods and services credits and an increase of 1.5% in the IPD for goods and services debits. In trend terms, the terms of trade for net goods and services rose 1.7% to 118.1. BALANCE ON GOODS AND SERVICES In seasonally adjusted chain volume terms, the balance on goods and services was a deficit of $12,761m, a fall of $1,514m on the December quarter 2017 deficit of $14,275m. The net deficit on goods fell $873m on the December quarter 2017 deficit of $11,697m. Goods credits rose $1,903m (3%) and goods debits rose $1,031m (1%). The net deficit on services fell $641m on the December quarter 2017 deficit of $2,578m. The fall in the balance on goods and services deficit, in seasonally adjusted chain volume terms, is expected to contribute 0.3 percentage points to growth in the March quarter 2018 chain volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the December quarter 2017. GOODS AND SERVICES, CHAIN VOLUME MEASURES (a) Goods The trend estimate of net goods at current prices for the March quarter 2018 was a surplus of $3,055m, a rise of $784m on the December quarter 2017 surplus of $2,271m. In seasonally adjusted terms at current prices, net goods was a surplus of $5,042m, a rise of $4,586m on the December quarter 2017 surplus of $456m.
GOODS CREDITS The trend estimate of goods credits at current prices rose $2,584m (3%) to $79,043m in the March quarter 2018. In seasonally adjusted terms at current prices, goods credits rose $6,819m (9%) to $81,611m, with volumes up 3% and prices up 6%. Rural Goods Exports of rural goods, in seasonally adjusted terms at current prices, fell $171m (2%) to $11,177m, with volumes down 5% and prices up 3%. The main components contributing to the fall were:
Partly offsetting these falls was meat and meat preparations, up $135m (5%), with volumes up 4%. Non-rural Goods Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $6,026m (10%) to $64,699m, with volumes up 3% and prices up 7%. The main components contributing to the rise were:
Net Exports of Goods Under Merchanting Net exports of goods under merchanting, in seasonally adjusted terms at current prices, fell $24m (55%) to $20m, with volumes down 57% and prices up 6%. Non-monetary Gold Exports of non-monetary gold, in original and seasonally adjusted terms at current prices, rose $988m (21%) to $5,715m, with volumes up 19% and prices up 2%. GOODS DEBITS The trend estimate of goods debits at current prices rose $1,801m (2%) to $75,989m in the March quarter 2018. In seasonally adjusted terms at current prices, goods debits rose $2,233m (3%) to $76,569m, with volumes up 1% and prices up 2%. Consumption Goods Imports of consumption goods, in seasonally adjusted terms at current prices, fell $170m (1%) to $25,699m. The main components contributing to the fall were:
Partly offsetting these falls was non-industrial transport equipment, up $108m (2%), with prices up 2%. Capital Goods Imports of capital goods, in seasonally adjusted terms at current prices, rose $1,040m (6%) to $18,474m, with volumes up 4% and prices up 2%. The main components contributing to the rise were:
Partly offsetting these rises was telecommunications equipment, down $516m (15%), with volumes down 16% and prices up 1%. Intermediate and Other Merchandise Goods Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $967m (3%) to $30,793m, with prices up 4%. The main components contributing to the rise were:
Non-monetary Gold Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, rose $395m (33%) to $1,602m, with volumes up 30% and prices up 2%. SERVICES The trend estimate of net services at current prices was a deficit of $1,258m, a rise of $89m on the December quarter 2017 deficit of $1,169m. In seasonally adjusted terms at current prices, net services was a deficit of $959m, a fall of $519m on the December quarter 2017 deficit of $1,478m.
Services Credits Services credits, in seasonally adjusted terms at current prices, rose $243m (1%) to $21,383m, with volumes up 1%. The main components contributing to the rise were:
In seasonally adjusted terms, tourism related services credits rose $92m (1%) to $14,269m. Services Debits Services debits, in seasonally adjusted terms at current prices, fell $275m (1%) to $22,342m, with volumes down 2% and prices up 1%. The main components contributing to the fall were:
Partly offsetting these falls was transport, up $96m (2%) with volumes up 3% and prices down 1%. In seasonally adjusted terms, tourism related services debits fell $347m (3%) to $12,756m. PRIMARY INCOME The trend estimate of the net primary income deficit at current prices rose $291m to $13,684m in the March quarter 2018. In seasonally adjusted terms at current prices, the net primary income deficit rose $1,025m to $14,253m in the March quarter 2018. Primary Income Credits Primary income credits, in seasonally adjusted terms at current prices, fell $105m (1%) to $14,431m. The main component of investment income contributing to the fall was direct investment assets, income on equity and investment fund shares, down $164m (3%). Primary Income Debits Primary income debits, in seasonally adjusted terms at current prices, rose $920m (3%) to $28,684m. The main components of investment income contributing to the rise were direct investment liabilities, investment income on equity and investment fund shares, up $553m (5%) and portfolio investment liabilities, interest, up $548m (9%). SECONDARY INCOME The trend estimate of the net secondary income deficit at current prices fell $37m to $342m in the March quarter 2018. In seasonally adjusted terms at current prices, the net secondary income deficit fell $112m to $299m in the March quarter 2018. CAPITAL ACCOUNT In original terms, the capital account deficit was $21m, a decrease of $382m on the December quarter 2017 deficit of $403m. Capital account credits increased $113m and capital account debits decreased $269m (65%) in the March quarter 2018. FINANCIAL ACCOUNT The balance on the financial account, in original terms, recorded a net inflow of $7.4b, which was driven by a net inflow of equity of $3.5b and a net inflow of debt of $3.9b. The financial account surplus decreased $10.0b (58%) from $17.4b in the December quarter 2017, to $7.4b in the March quarter 2018. Direct Investment Direct investment recorded a net inflow of $13.9b in the March quarter 2018, an increase of $9.2b on the net inflow of $4.6b in the December quarter 2017, where:
Portfolio Investment Portfolio investment recorded a net inflow of $2.9b in the March quarter 2018, a decrease of $8.1b on the net inflow of $10.9b in the December quarter 2017, where:
Financial Derivatives Financial derivatives recorded a net inflow of $6.7b in the March quarter 2018, a turnaround of $13.1b on the net outflow of $6.3b in the December quarter 2017. Other Investment Other investment recorded a net outflow of $26.5b in the March quarter 2018, a turnaround of $47.5b on the net inflow of $21.0b in the December quarter 2017. This was driven by net outflows of $19.5b in currency and deposits and $10.1b in loans. Reserve Assets Reserve assets recorded an inflow of $10.4b in the March quarter 2018, a turnaround of $23.3b on the outflow of $12.8b in the December quarter 2017. INTERNATIONAL INVESTMENT POSITION (IIP) Australia's net IIP liability position was $954.6b at 31 March 2018, a decrease of $34.1b on the revised 31 December 2017 position of $988.6b. Australia's net foreign debt liabilities increased $1.7b to $1,025.8b. Australia's net foreign equity assets increased $35.7b to $71.3b at 31 March 2018. The changes contributing to this result are shown in the following table.
SUPPLEMENTARY INFORMATION CONDITIONS The conditions in the global economy showed modest growth in Australia’s major trading partner countries in the March quarter 2018. According to the Organisation for Economic Cooperation and Development (OECD)(footnote 2) preliminary growth rates compared to last quarter in seasonally adjusted terms showed quarterly growth for China (1.4%), Indonesia (1.2%), South Korea (1.1%), the USA (0.6%), the Euro 28 (0.4%), France (0.3%), the UK (0.1%) and Japan (-0.2%).
The Australian share market, as measured by the MSCI global index(footnote 3) decreased 5.5% in the March quarter 2018, following an increase of 6.2% in the December quarter 2017. Decreases were recorded in the UK (8.3%), New Zealand (7.7%), Switzerland (6.7%), Germany (6.1%), Japan (5.6%), Canada (5.2%), France (2.2%), Hong Kong (1.4%) and the USA (1.1%). Increases were recorded in China (2.1%) and Singapore (0.7%). A market price change of $21.9b was recorded for foreign equity assets and -$24.6b in foreign equity liabilities in the March quarter 2018. According to Thomson Reuters(footnote 4), the composite corporate benchmark yields increased in the USA from 3.29% to 3.82%, the UK from 2.16% to 2.49%, Germany from 0.87% to 1.00% and Australia from 3.16% to 3.23%. The yields in Japan remained the same at 0.29% over the March quarter 2018. The long-term 10 year government bond yields increased in the USA from 2.40% to 2.74%, the UK from 1.19% to 1.35%, Australia from 2.58% to 2.72% and Germany from 0.42% to 0.50%. The yields decreased in Japan from 0.05% to 0.04% over the March quarter 2018. A market price change of $2.2b was recorded for portfolio debt securities assets and -$1.3b in portfolio debt securities liabilities in the March quarter 2018. The Australian dollar depreciated against major currencies in the March quarter 2018. The dollar depreciated 7.20% against the Japanese yen, 6.09% against the UK pound sterling, 5.11% against the Chinese renminbi, 4.79% against the European euro, 4.04% against the Swiss franc, 3.58% against the Singapore dollar, 3.54% against the New Taiwan dollar, 3.14% against the New Zealand dollar, 2.13% against the South Korean won, 1.73% against the US dollar and 1.38% against the Hong Kong dollar. The Australian dollar appreciated 1.05% against the Canadian dollar and 0.10% against the Indian rupee. The Trade Weighted Index (TWI)(footnote 5) fell 4.01% to 62.30 in the March quarter 2018. These movements were reflected in exchange rate changes for foreign assets of -$52.1b and foreign liabilities of $16.3b in the March quarter 2018. RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6) In original terms, the IPD for total goods credits rose 5.8% and the chain Laspeyres price index for goods exports rose 5.0%. The Export Price Index (EPI)(footnote 7) rose 4.9% during the March quarter 2018. In original terms, the IPD for total goods debits rose 2.2% and the chain Laspeyres price index for goods imports rose 1.8%. The Import Price Index (IPI)(footnote 7) rose 2.1% during the March quarter 2018. 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.
Commodity Price Indexes The RBA Commodity Price Index (average monthly index) for rural commodities increased 5.1% between the December quarter 2017 and the March quarter 2018 while the EPI for rural goods increased 2.8%. The RBA Commodity Price Index for non-rural commodities increased 7.4% between the December quarter 2017 and the March quarter 2018 while the EPI for non-rural goods total (excluding non-monetary gold) increased 5.6%. 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. FOOTNOTES 1 In this commentary movements in indexes are based on data to four decimal places. <back 2 OECD Statistics Quarterly National Account, Organisation for Economic Cooperation and Development – Economic Department, viewed 17 May 2018. <back 3 MSCI Global Market Indexes 2017, Morgan Stanley Capital International, viewed 5 April 2018. <back 4 Thomson Reuters, viewed 17 April 2018. <back 5 Exchange Rates – Daily 2014 to Current, Reserve Bank of Australia - Statistical Tables, viewed 4 April 2018. <back 6 In this commentary movements in indexes are based on data to four decimal places. <back 7 Source: International Trade Price Indexes, Australia (cat. no. 6457.0) <back Document Selection These documents will be presented in a new window.
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