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5302.0 - Balance of Payments and International Investment Position, Australia, Dec 2008  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 03/03/2009   
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

The trend estimate of the balance on current account for the December quarter 2008 was a deficit of $6,894m. This was a decrease of $2,027m (23%) on the deficit recorded for the September quarter 2008 where:

  • the goods and services surplus rose $1,371m (56%) to $3,798m
  • the income deficit fell $676m (6%) to $10,573m
  • the current transfers deficit rose $20m (20%) to $119m.

In seasonally adjusted terms, the current account deficit fell $2,999m (32%) to $6,499m between the September quarter 2008 and December quarter 2008 where:
  • the goods and services surplus rose $2,657m to $4,086m
  • the income deficit fell $406m (4%) to $10,442m
  • the current transfers deficit rose $64m (81%) to $143m.


Goods and Services

The trend estimate of the balance on goods and services at current prices was a surplus of $3,798m, an increase of $1,371m (56%) on the September quarter 2008 surplus.

In seasonally adjusted terms, the balance on goods and services was a surplus of $4,086m, an increase of $2,657m on the September quarter 2008 surplus where:
  • the net goods surplus rose $3,081m to $4,487m
  • the net services surplus fell $423m resulting in a deficit of $400m.

The increase in the goods surplus resulted from the increase in goods credits (exports), up $5,822m (10%) outweighing the increase in goods debits (imports), up $2,741m (5%).

Contributing to the increase in goods credits were:
  • non-rural goods, up $4,445m (9%)
  • rural goods, up $974m (15%).

Contributing to the increase in goods debits were:
  • capital goods, up $1,369m (11%)
  • consumption goods, up $891m (6%).

The deficit on services of $400m was a turnaround of $423m on the September quarter 2008 surplus of $23m. This resulted from the increase in services debits, up $551m (4%) outweighing the increase in services credits, up $128m (1%).

In seasonally adjusted volume terms, the deficit on goods and services was $7,106m, a decrease of $4,208m (37%) on the $11,314m deficit recorded in the September quarter 2008. The net deficit on goods fell $2,785m (26%) to $7,871m. Goods credits fell $427m (1%) and goods debits fell $3,212m (6%). The net services balance was a surplus of $764m, a turnaround of $1,422m on the deficit of $658m in September quarter 2008.

The decrease of $4,208m in the deficit on goods and services in volume terms is expected to add 1.5 percentage points to growth in the December quarter 2008 volume measures of GDP, assuming no significant revision to the GDP chain volume estimate for the September quarter 2008.

Goods and Services(a)
Graph: Goods and Services(a)



Goods Credits

The trend estimate of goods credits rose $4,222m (7%) to $64,844m in the December quarter 2008.

In seasonally adjusted terms at current prices, goods credits rose $5,822m (10%) to $66,094m.

Exports of rural goods, in seasonally adjusted terms at current prices, rose $974m (15%) to $7,657m, with volumes up 3% and prices up 11%. All components increased with the largest increases in:
  • other rural, up $530m (18%), with volumes up 4% and prices up 14%
  • meat and meat preparations, up $224m (12%), with prices up 12%
  • cereal grains & cereal preparations, up $204m (15%), with volumes up 15%.

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $4,445m (9%) to $53,424m, with volumes down 1% and prices up 10%. The largest increases were in:
  • coal, coke and briquettes, up $3,899m (28%), with volumes down 4% and prices up 32%
  • other mineral fuels, up $766m (14%), with volumes up 24% and prices down 8%
  • other non-rural (including sugar and beverages), up $348m (13%), with volumes up 4% and prices up 9%.

Partly offsetting these increases was the metal ores and minerals component, down $805m (5%) with volumes down 7% and prices up 1%.

Exports of other goods, in seasonally adjusted terms at current prices, rose $404m (9%) to $5,014m. The main contributor to this increase was the non-monetary gold component, up $247m (6%), with volumes down 13% and prices up 21%.

General Merchandise Credits(a)
Graph: General Merchandise Credits(a)



Goods Debits

The trend estimate of goods debits rose $2,656m (5%) to $60,793m in the December quarter 2008.

In seasonally adjusted current price terms, goods debits rose $2,741m (5%) to $61,608m.

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $891m (6%) to $16,149m, with volumes down 8% and prices up 16%. The largest increases were in:
  • consumption goods, n.e.s., up $531m (11%), with volumes down 4% and prices up 16%
  • textiles, clothing and footwear, up $389m (21%), with volumes down 6% and prices up 29%
  • food and beverages, mainly for consumption, up $159m (7%), with volumes down 8% and prices up 16%.

Partly offsetting these increases was the non-industrial transport equipment component, down $370m (9%), with volumes down 13% and prices up 5%.

Imports of capital goods, in seasonally adjusted terms at current prices, rose $1,369m (11%) to $14,172m, with volumes down 10% and prices up 23%.

A change in the classification of civil aircraft has contributed to an increase in capital goods, n.e.s., (up $1,697m), and a decrease in civil aircraft, (down $624m). These two series should be interpreted with caution due to this change in classification which is described under Changes to Import Confidentiality Restrictions.

The largest increases in other components were in :
  • machinery and industrial equipment, up $412m (9%), with volumes down 11% and prices up 23%
  • ADP equipment, up $396m (23%), with volumes down 2% and prices up 25%.

Partly offsetting these increases was the industrial transport equipment, n.e.s. component, down $575m (23%), with volumes down 31% and prices up 12%.

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, fell $68m to $27,246m, with volumes down 3% and prices up 2%. The decreases were in:
  • fuels and lubricants, down $1,659m (17%), with volumes up 17% and prices down 30%
  • other merchandise goods, down $370m (59%), with volumes down 63% and prices up 11%.

Partly offsetting these decreases were:
  • other parts for capital goods, up $580m (18%), with volumes down 2% and prices up 21%
  • processed industrial supplies, n.e.s., up $563m (10%), with volumes down 6% and prices up 17%
  • iron and steel, up $378m (25%), with volumes down 2% and prices up 28%.

Imports of other goods, in seasonally adjusted terms at current prices, rose $549m (16%) to $4,041m, with volumes up 2%. The largest increase was in the non-monetary gold component, up $468m (18%), with volumes down 3% and prices up 21%.

General Merchandise Debits(a)
Graph: General Merchandise Debits(a)



Services

The trend estimate of net services at current prices was a deficit of $253m, an increase of $195m on the revised September quarter 2008 deficit of $58m.

In seasonally adjusted terms at current prices, net services recorded a deficit of $400m, a turnaround of $423m on the September quarter 2008 surplus of $23m.

Services credits, in seasonally adjusted terms at current prices, rose $128m (1%) to $13,850m, with prices up 1%. The components increasing were :
  • other services, up $97m (3%), with volumes up 2% and prices up 1%
  • transportation services, up $54m (2%), with volumes down 2% and prices up 4%.

Partly offsetting these increases was the travel services component, down $23m, with volumes down 1% and prices up 1%.

Services debits, in seasonally adjusted terms at current prices, rose $551m (4%) to $14,250m, with volumes down 11% and prices up 17%. All components contributed to this increase with:
  • other services, up $275m (6%), with volumes down 13% and prices up 22%
  • transportation services, up $241m (5%), with volumes down 4% and prices up 10%
  • travel services, up $36m (1%), with volumes down 15% and prices up 18%.

Seasonally adjusted, tourism related services credits rose $1m to $8,387m, and tourism related services debits rose $78m (1%) to $6,523m.


IMPLICIT PRICE DEFLATOR*

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits rose 9.0%. In original terms, it rose 8.6%. The chain Laspeyres price index for goods and services credits rose 9.2%. In original terms, the IPD for goods credits rose 10.3% and the IPD for services credits rose 1.4%.

The total goods and services debits IPD rose 12.2% in seasonally adjusted terms. In original terms, it rose 12.1% and the chain Laspeyres price index for goods and services debits rose 11.3%. In original terms, the IPD for goods debits rose 11.0% and the IPD for services debits rose 16.8%.

IMPLICIT PRICE DEFLATOR(a)
Graph: IMPLICIT PRICE DEFLATOR(a)



Relationship to IPI and EPI*

In original terms, the implicit price deflator for total goods credits rose 10.3% while the chain Laspeyres price index for goods exports rose 10.9%. The export price index (EPI) rose 15.9% during the December quarter 2008.

In original terms, the implicit price deflator for total goods debits rose 11.0% while the chain Laspeyres price index for goods imports rose 10.3%. The import price index (IPI) rose 10.8% during the December quarter 2008.


Terms of Trade*

Australia's seasonally adjusted terms of trade fell 2.8% to 118.4, with an increase of 9.0% in the IPD for goods and services credits and an increase of 12.2% in the goods and services debits IPD. The trend estimate of the terms of trade increased marginally to 121.0.

* In this commentary movements in indexes other than EPI and IPI are based on data to four decimal places.


Income

The trend estimate of the net income deficit decreased $676m (6%) to $10,573m.

In seasonally adjusted terms the net income deficit decreased $406m (4%) to $10,442m. Income debits decreased $1,008m (5%) to $20,786m and income credits decreased $603m (6%) to $10,344m. The main component contributing to the decrease in income debits was a $1,735m (19%) decrease in direct investment in Australia, income on equity. This was offset by a $443m (23%) increase in portfolio investment liabilities, income on equity and a $252m (3%) increase in portfolio investment liabilities, income on debt. The main component contributing to the decrease in credits was a $663m (24%) decrease in portfolio investment assets, income on debt.

In original terms the net income deficit fell $1,727m (14%) to $10,475m. Income credits decreased $901m (8%) to $9,722m. Income debits decreased $2,628m (12%) to $20,197m.

Net Income
Graph: Net Income



Current Transfers

In seasonally adjusted terms, the net current transfers deficit was $143m, an increase of $64m (81%) on the $79m deficit recorded in September quarter 2008. Current transfer credits fell $23m (2%) and current transfer debits rose $41m (3%) in the December quarter 2008.


CAPITAL AND FINANCIAL ACCOUNT

Capital Account

In original terms, the capital account surplus was $601m, down $182m (23%) on the September quarter 2008 surplus. Capital transfer credits fell $78m (7%) to $970m and capital transfer debits rose $104m (39%) to $369m.


Financial Account

The balance on financial account recorded a net inflow of $7.1b, with a $26.0b inflow of equity and a $19.0b outflow of debt.

The financial account surplus fell in the December quarter 2008 in line with the fall in the current account deficit. There was a significant increase in net short term debt maturities by Australian depository corporations from $8.1b in September quarter 2008 to $49.7b in the December quarter 2008. This was partially offset by an increase in long term debt issuance by the Australian depository corporations which picked up during the December quarter 2008 (a turnaround of $17.2b on the September quarter 2008 net maturities of $9.1b). Another key influence on the financial account has been a turnaround of $24.7b in December quarter 2008 in loans liabilities by Australian depository corporations, from $23.4b in September quarter 2008 to -$1.3b in December quarter 2008.

Direct investment in Australia recorded an inflow of $21.4b in the December quarter 2008, an increase of $9.5b on the September quarter 2008 inflow of $11.9b. Australia's direct investment abroad recorded an outflow of $7.6b, a decrease of $2.5b on the previous quarter's outflow of $10.1b. In net terms, direct investment recorded an inflow of $13.8b in the December quarter 2008, an increase of $12.0b on the September quarter 2008 inflow of $1.8b.

Portfolio investment recorded a net outflow of $10.9b, an increase of $2.5b on the net outflow of $8.4b in the September quarter 2008. This was driven by a decrease of $23.6b in portfolio investment debt securities liabilities on the September quarter 2008 to a net outflow of $38.3b.

Other investment recorded a net inflow of $0.3b, a decrease of $17.4b on the net inflow of $17.7b in the previous quarter.

Reserve assets recorded a net outflow of $2.2b, a turnaround of $7.3b on the previous quarter's net inflow of $5.1b.


INTERNATIONAL INVESTMENT POSITION


INTERNATIONAL INVESTMENT

Australia's net international investment position at 31 December 2008 was a net foreign liability of $713.9b,up $4.1b (1%) on 30 September 2008. The increase consisted of:
  • exchange rate changes of $8.8b
  • net transactions of $7.1b
  • price changes of -$11.7b.

During the December quarter 2008 Australia's net foreign equity liability decreased by $16.0b (31%) to $35.6b. Decreases due to exchange rate changes of -$38.2b and price changes of -$3.0b were partially offset by an increase in transactions of $26.0b.

Australia's net foreign debt liability increased by $20.1b (3%) to $678.3b. Increases due to exchange rate changes of $47.0b and other changes of $0.8b were partially offset by decreases in transactions of -$19.0b and price changes of -$8.7b.


CALENDAR YEAR 2008 SITUATION


BALANCE OF PAYMENTS

In original terms, the balance on current account for calendar year 2008 was a deficit of $50.2b, a 27% decrease on the deficit of $68.4b recorded for 2007. The balance on goods and services deficit was $3.8b, a decrease of $16.4b on the deficit of $20.2b recorded in 2007. Goods exports increased $56.0b (33%) due to increases in both volumes and prices. Goods imports increased $38.3b (20%) due to an increase in volumes and prices.

A turnaround of $1.3b on the 2007 services surplus of $1.3b, resulted in services credits and debits almost balancing in 2008.

The 2008 net income deficit fell $1.9b (4%), with an increase in income credits of $3.2b (8%) and an increase in income debits of $1.2b (1%).

The 2008 balance on financial account recorded a net inflow of $47.6b, with a net inflow on debt of $19.4b and a net inflow on equity of $28.2b. This result was down $18.9b on the net inflow recorded for the previous year as a result of:
  • a turnaround of $51.7b to a net inflow on portfolio investment
  • a turnaround of $44.5b to a net outflow on reserve assets
  • a decrease of $30.6b on the net inflow on other investment
  • a turnaround of $21.4b to a net inflow on financial derivatives
  • a decrease of $16.9b on the net inflow on direct investment.


INTERNATIONAL INVESTMENT

Australia's net international investment position as at 31 December 2008 was a net foreign liability of $713.9b. This was up $41.5b (6%) on the position a year earlier as a result of:
  • net transactions of $47.6b
  • exchange rate changes of $22.1b
  • other adjustments of $0.4b
  • price changes of -$28.6b.

During 2008 calendar year, the level of net equity liabilities decreased to $35.6b, down $33.4b (48%) on the previous year with exchange rate changes of -$62.7b, partially offset by transactions of $28.2b, price changes of $0.8b, and other changes of $0.3b.

Net foreign debt rose to $678.3b, up $74.9b (12%) on the previous year, with exchange rate changes of $84.9b, transactions of $19.4b, and other changes of $0.1b. This was partially offset by price changes of -$29.5b.

At 31 December 2008, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 30 September 2008 using current prices) was 61.6%. This compares with 61.9% one year ago and 53.7% one decade ago.


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