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5302.0 - Balance of Payments and International Investment Position, Australia, March 2012 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 05/06/2012   
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

In original current price terms, the March quarter 2012 current account deficit was $15,640m, a rise of $5,900m (61%) on the December 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 - March Quarter 2012

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

Seasonally Adjusted

Balance on current account
-14 892
-5 253
-54.5
Balance on goods and services
-3 062
-5 316
-235.8
Net goods
71
-4 773
-98.5
Net services
-3 133
-543
-21.0
Net primary income
-11 668
72
0.6
Net secondary income
-163
-10
-6.5

Trend

Balance on current account
-13 172
-3 204
-32.1
Balance on goods and services
-1 388
-3 292
-172.9
Net goods
1 690
-2 938
-63.5
Net services
-3 078
-354
-13.0
Net primary income
-11 623
96
0.8
Net secondary income
-161
-8
-5.2




VOLUMES AND PRICES

Goods and Services

In seasonally adjusted chain volume terms, the balance on goods and services was a deficit of $14,635m, a rise of $1,816m (14%) on the December quarter 2011 deficit of $12,819m.

The net deficit on goods rose $647m (7%) on the December quarter 2011 deficit of $8,700m. Goods credits fell $769m (1%) and goods debits fell $122m. The net deficit on services rose $1,167m (28%) on the December quarter 2011 deficit of $4,120m.

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 March quarter 2012 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the December 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 fell 4.3% to 117.5, with a decrease of 6.2% in the implicit price deflator (IPD) for goods and services credits and a decrease of 2.1% in the IPD for goods and services debits.

In trend terms, the terms of trade for net goods and services fell 3.1% to 119.8.

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 $1,690m, a fall of $2,938m (63%) on the December quarter 2011 surplus of $4,628m.

In seasonally adjusted terms at current prices, net goods recorded a surplus of $71m, a fall of $4,773m (99%) on the December quarter 2011 surplus of $4,844m.

GOODS, Price and volume analysis: Seasonally Adjusted - March Quarter 2012

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

Exports
-5 917
-8.7
-1.4
-7.4
Rural goods
-845
-9.5
-2.8
-6.9
Non-rural goods
-3 914
-7.2
0.5
-7.6
Net exports of goods under merchanting
-8
-8.2
4.1
-12.1
Non-monetary gold
-1 150
-25.4
-22.9
-3.3
Imports
-1 144
-1.8
-0.2
-1.6
Consumption goods
263
1.6
4.4
-2.7
Capital goods
-135
-0.8
0.3
-1.1
Intermediate and other merchandise goods
-703
-2.5
-2.2
-0.3
Non-monetary gold
-569
-27.4
-24.4
-3.9




Services

SERVICES, Price and volume analysis: Seasonally Adjusted - March Quarter 2012

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

Exports
-56
-0.4
-0.5
0.1
Manufacturing services on physical inputs owned by others
-
-
-
0.5
Maintenance and repair services n.i.e.
-
-
-
0.5
Transport
-12
-0.8
-
-0.7
Travel
-52
-0.7
-0.8
0.1
Other services
8
0.2
-0.1
0.4
Imports
487
3.2
6.9
-3.4
Manufacturing services on physical inputs owned by others
-
-
-
-
Maintenance and repair services n.i.e.
-24
-22.4
-19.0
-4.2
Transport
212
5.4
8.2
-2.6
Travel
190
2.9
6.6
-3.5
Other services
108
2.4
6.8
-4.1

- nil or rounded to zero (including null cells)



GOODS CREDITS

The trend estimate of goods credits at current prices fell $2,050m (3%) to $64,688m in the March quarter 2012.

In seasonally adjusted terms at current prices, goods credits fell $5,917m (9%) to $62,249m, with volumes down 1% and prices down 7%.


Rural Goods

Exports of rural goods, in seasonally adjusted terms at current prices, fell $845m (9%) to $8,062m, with volumes down 3% and prices down 7%. The main components contributing to the fall were:
  • other rural, down $407m (11%), with volumes down 3% and prices down 7%
  • cereal grains and cereal preparations, down $343m (14%), with volumes down 4% and prices down 10%.


Non-rural Goods

Exports of non-rural goods, in seasonally adjusted terms at current prices, fell $3,914m (7%) to $50,726m, with prices down 8%. The main components contributing to the fall were:
  • metal ores and minerals, down $2,458m (11%), with volumes down 4% and prices down 8%
  • coal, cokes and briquettes, down $1,263m (10%), with volumes up 7% and prices down 16%.
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, fell $8m (8%) to $90m, with volumes up 4% and prices down 12%.


Non-monetary Gold

Non-monetary gold, in original and seasonally adjusted terms at current prices, fell $1,150m (25%), with volumes down 23% and prices down 3%.


GOODS DEBITS

The trend estimate of goods debits at current prices rose $888m (1%) to $62,998m in the March quarter 2012.

In seasonally adjusted terms at current prices, goods debits fell $1,144m (2%) to $62,178m, with prices down 2%.


Consumption Goods

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $263m (2%) to $16,757m with volumes up 4% and prices down 3%. The main component contributing to the rise was non-industrial transport equipment, up $380m (9%), with volumes up 11% and prices down 1%.

Partly offsetting this rise was the consumption goods n.e.s. component, down $102m (2%), with volumes up 4% and prices down 5%.


Capital Goods

Imports of capital goods, in seasonally adjusted terms at current prices, fell $135m (1%) to $17,019m with prices down 1%. The main components contributing to the fall were:
  • civil aircraft and confidentialised items, down $875m (43%), with volumes down 42% and prices down 1%
  • telecommunications equipment, down $214m (10%), with volumes down 6% and prices down 4%.

Partly offsetting these falls were:
  • machinery and industrial equipment, up $442m (9%), with volumes up 10% and prices down 1%
  • capital goods n.e.s., up $381m (9%), with volumes up 11% and prices down 1%.


Intermediate and Other Merchandise Goods

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, fell $703m (3%) to $26,894m, with volumes down 2%. The main components contributing to the fall were:
  • processed industrial supplies n.e.s., down $462m (7%), with volumes down 9% and prices up 2%
  • other merchandise goods, down $189m (40%), with volumes down 39% and prices down 1%.


Non-monetary Gold

Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, fell $569m (27%) to $1,508m, with volumes down 24% and prices down 4%.


SERVICES

The trend estimate of net services at current prices was a deficit of $3,078m, a rise of $354m (13%) on the December quarter 2011 deficit of $2,724m.

In seasonally adjusted terms at current prices, net services recorded a deficit of $3,133m, a rise of $543m (21%) on the December quarter 2011 deficit of $2,590m.


Services Credits

Services credits, in seasonally adjusted terms at current prices, fell $56m to $12,453m. The main component contributing to the fall was travel, down $52m (1%), with volumes down 1%.

In seasonally adjusted terms, tourism related service credits fell $63m (1%) to $8,259m.


Services Debits

Services debits, in seasonally adjusted terms at current prices, rose $487m (3%) to $15,586m, with volumes up 7% and prices down 3%. The main components contributing to the rise were:
  • transport, up $212m (5%), with volumes up 8% and prices down 3%
  • travel, up $190m (3%), with volumes up 7% and prices down 3%
  • other services, up $108m (2%), with volumes up 7% and prices down 4%.

In seasonally adjusted terms, tourism related service debits rose $257m (3%) to $8,566m.


PRIMARY INCOME

The trend estimate of the net primary income deficit at current prices fell $96m (1%) in the March quarter 2012 to $11,623m.

In seasonally adjusted terms, the net primary income deficit fell $72m (1%) in the March quarter 2012 to $11,668m.

NET PRIMARY INCOME
Graph: NET PRIMARY INCOME



Primary Income Credits

Primary income credits, in seasonally adjusted terms at current prices, fell $760m (7%) to $9,682m. The main components contributing to the fall were:
  • portfolio investment assets, investment income on equity and investment fund shares, down $314m (13%)
  • direct investment assets, income on equity and investment fund shares, down $227m (5%)
  • portfolio investment assets, interest, down $177m (8%).


Primary Income Debits

Primary income debits, in seasonally adjusted terms at current prices, fell $832m (4%) to $21,350m. The main components contributing to the fall were:
  • portfolio investment liabilities, interest, down $386m (6%)
  • direct investment liabilities, income on equity and investment fund shares, down $135m (2%)
  • direct investment liabilities, interest, down $113m (8%)
  • portfolio investment liabilities, investment income on equity and investment fund shares, down $99m (3%).


SECONDARY INCOME

The trend estimate of the net secondary income deficit at current prices, rose $8m (5%) to $161m in the March quarter 2012.

In seasonally adjusted terms, the net secondary income deficit at current prices, rose $10m (7%) to $163m in the March quarter 2012.


FINANCIAL ACCOUNT

The balance on financial account, in original terms, recorded a net inflow of $15.9b, with a net inflow of $10.4b of equity and a net inflow of $5.5b of debt.

The financial account surplus increased $5.7b, from $10.2b in December quarter 2011 to $15.9b in March quarter 2012.

Direct investment recorded a net inflow of $12.1b in March quarter 2012, a decrease of $10.1b from the net inflow of $22.2b in December quarter 2011, where:
  • direct investment liabilities recorded an inflow of $13.0b, a decrease of $13.0b on the inflow of $26.0 in December quarter 2011
  • direct investment assets recorded an outflow of $0.9b, a decrease of $2.9b on the outflow of $3.8b in December quarter 2011.

Portfolio investment recorded a net inflow of $15.4b, an increase of $1.6b on the net inflow of $13.8b in December quarter 2011, where:
  • equity and investment fund shares recorded a net inflow of $4.9b
  • debt securities recorded a net inflow of $10.5b, where portfolio investment liabilities debt securities decreased $1.8b to $15.7b in March quarter 2012.

Financial derivatives recorded a net outflow of $5.9b, a turnaround of $5.9b from the net inflow of $0.03b in December quarter 2011.

Other investment recorded a net outflow of $1.1b, a decrease of $21.0b from the net outflow of $22.1b in December quarter 2011.

Reserve assets recorded a net outflow of $4.7b, an increase of $0.9b from the net outflow of $3.7b in December quarter 2011.


INTERNATIONAL INVESTMENT POSITION


ANALYSIS

Australia's net international investment position at 31 March 2012 was a net foreign liability of $880.2b, up $23.8b on the 31 December 2011 position of $856.4b.

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

INTERNATIONAL INVESTMENT POSITION, Summary - March Quarter 2012

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

Position at beginning of period
856 440
121 291
735 148
Changes in position reflecting
Transactions
15 868
10 389
5 479
Price changes
3 619
4 022
-404
Exchange rate changes
5 130
2 845
2 285
Other adjustments
-843
-448
-395
Total changes
23 773
16 808
6 965
Position at end of period
880 213
138 099
742 114




SUPPLEMENTARY INFORMATION


CONDITIONS

The conditions in the global economy showed moderate increases for most countries in the March quarter 2012. According to the Organisation for Economic Cooperation and Development (OECD), preliminary real GDP estimates in seasonally adjusted terms showed movement in quarterly growth for: Japan (1.0%), USA (0.5%), Germany (0.5%), France (0.04%), UK (-0.3%) and overall OECD total of 0.4%.

Australia's international investment activities during the quarter were as follows:
  • foreign asset transactions were -$12.1b in March quarter 2012 compared to $6.3b in December quarter 2011
  • foreign liability transactions were $28.0b in March quarter 2012 compared to $3.9b in December quarter 2011.

The Australian share market, as measured by the MSCI global index, increased 6.4% in March quarter 2012, following a 0.9% increase in December quarter 2011. There were increases in all major markets: Germany 17.5%, Singapore 15.5%, Hong Kong 13.0%, USA 12.2%, Europe ex UK 11.8%, France 9.2%, New Zealand 8.2%, Switzerland 5.4%, Canada 3.9% and United Kingdom 3.5%. A market price change of -$17.3b was recorded for foreign equity assets and $21.3b in foreign equity liabilities during March quarter 2012.

According to Bloomberg, the composite corporate benchmark yield decreased in Australia from 6.6% to 6.1%, in the UK from 4.9% to 4.5%, in Germany from 4.4% to 3.2%, in USA from 3.9% to 3.5% and remained flat in Japan at 0.8%. Long term government bond yields increased or remained flat in the major markets in March quarter 2012. The 10 year government bond yields increased in the UK from 2.0% to 2.2% and in the USA from 1.9% to 2.2%, while they remained flat in Germany at 1.8% and Japan at 1.0%. In Australia, the rate increased from 3.8% to 4.2%. This is reflected in the market price changes for both portfolio debt securities liabilities (-$5.3b) and assets ($1.1b) in March quarter 2012.

The Australian dollar appreciated against a number of the major currencies and fell against others in March quarter 2012. It increased 8.4% against the Japanese yen, 2.4% against the US dollar, 2.4% against the Hong Kong dollar and 2.2% against the Chinese renminbi. The Australian dollar fell 6.5% against the Swedish krona, 6.4% against the Swiss franc, 3.5% against the New Zealand dollar, 3.4% against the Norwegian kronor and 1.2% against the UK pound. The Trade Weighted Index (TWI) recorded an increase of 1.5%. The net impact of exchange rates was a decrease of $4.0b on foreign assets and an increase of $1.1b on foreign liabilities.


RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 1)

In original terms, the IPD for total goods credits fell 7.3% and the chain Laspeyres price index for goods exports fell 6.8%. The export price index (EPI) fell 7.0% during the March quarter 2012.

In original terms, the IPD for total goods debits fell 0.6% and the chain Laspeyres price index for goods imports fell 1.2%. The import price index (IPI) fell 1.2% during the March quarter 2012.

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 March quarter 2012, the difference between the IPD and EPI were mainly due to the 'meat and meat preparations', 'cereal grains and cereal preparations' and 'other rural' components.

GOODS AND SERVICES, Price comparison - March Quarter 2012

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

Exports
Goods
-7.4
-7.3
-7.0
-6.8
Services
0.1
-
na
0.2
Imports
Goods
-1.6
-0.6
-1.2
-1.2
Services
-3.4
-3.5
na
-3.4

- nil or rounded to zero (including null cells)
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 1.7% between the December quarter 2011 and March quarter 2012 while the EPI for rural goods total decreased 3.3%.

The RBA Commodity Price Index for non-rural commodities decreased 6.3% while the EPI for non-rural goods total (excluding non-monetary gold) decreased 7.8%.

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.

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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