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5302.0 - Balance of Payments and International Investment Position, Australia, Jun 2008  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 01/09/2008   
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

The trend estimate of the balance on current account for the June quarter 2008 was a deficit of $14,146m. This was a decrease of $4,835m (25%) on the deficit recorded for the March quarter 2008 where:

  • the goods and services deficit fell $5,205m (84%) to $1,026m
  • the income deficit rose $358m (3%) to $13,067m
  • the current transfers deficit rose $12m (29%) to $53m.

In seasonally adjusted terms, the current account deficit fell $7,068m (36%) to $12,774m between the March quarter 2008 and June quarter 2008 where:
  • the goods and services turnaround of $7,872m resulted in a surplus of $559m
  • the income deficit rose $797m (6%) to $13,284m
  • the current transfers deficit rose $9m (22%) to $50m.


Goods and Services

The trend estimate of the balance on goods and services at current prices was a deficit of $1,026m, a decrease of $5,205m (84%) on the March quarter 2008 deficit.

In seasonally adjusted terms, the balance on goods and services was a surplus of $559m, a turnaround of $7,872m on the March quarter 2008 deficit where:
  • the net goods deficit fell $7,511m (94%) to $510m
  • the net services surplus rose $361m (51%) to $1,069m.

The decrease in the goods deficit resulted from the increase in goods credits (exports), up $9,135m (20%) outweighing the increase in goods debits (imports), up $1,625m (3%).

Contributing to the increase in goods credits were:
  • non-rural goods, up $8,924m (26%)
  • rural goods, up $507m (8%).

Contributing to the increase in goods debits was intermediate and other merchandise goods, up $1,697m (7%).

The increase in the services surplus resulted from the increase in services credits, up $550m (4%) outweighing the increase in services debits, up $189m (2%).

In seasonally adjusted volume terms, the deficit on goods and services was $12,853m, an increase of $57m on the $12,796m deficit recorded in the March quarter 2008. The net deficit on goods rose $42m to $12,371m. Goods credits rose $1,038m (3%) and goods debits rose $1,080m (2%). The net services balance was a deficit of $482m, an increase of $15m (3%) on the deficit of $467m in March quarter 2008.

The increase of $57m in the deficit on goods and services in volume terms could be expected to detract -0.1 percentage point contribution from growth in the June quarter 2008 volume measures of GDP, assuming no significant revision to the GDP chain volume estimate for the March quarter 2008.

Goods and Services, Chain volume measures(a)
Graph: Goods and Services(a)



Goods Credits

The trend estimate of goods credits rose $7,242m (16%) to $52,648m in the June quarter 2008.

In seasonally adjusted terms at current prices, goods credits rose $9,135m (20%) to $54,221m.

Exports of rural goods, in seasonally adjusted terms at current prices, rose $507m (8%) to $7,085m, with volumes up 7% and prices up 1%. The increases were in:
  • cereal grains and cereal preparations, up $446m (32%), with volumes up 24% and prices up 7%
  • meat and meat preparations, up $185m (12%), with volumes up 12% and prices unchanged.

Partly offsetting these increases was the wool and sheepskins component, down $94m (13%), with volumes down 10% and prices down 4%.

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $8,924m (26%) to $43,576m, with volumes up 2% and prices up 23%. The largest increases were in:
  • coal, coke and briquettes, up $4,822m (95%), with volumes up 12% and prices up 75%
  • metal ores and minerals, up $3,011m (29%), with volumes down 3% and prices up 34%
  • other mineral fuels, up $538m (11%), with volumes down 2% and prices up 13%

Exports of other goods, in seasonally adjusted terms at current prices, fell $295m (8%) to $3,561m. The main contributor to this decrease was the non-monetary gold component, down $322m (10%), with volumes down 3% and prices down 7%.

General Merchandise Credits, Chain volume measures(a)
Graph: General Merchandise Credits(a)



Goods Debits

The trend estimate of goods debits rose $2,254m (4%) to $54,652m in the June quarter 2008.

In seasonally adjusted current price terms, goods debits rose $1,625m (3%) to $54,731m.

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $42m to $15,434m, with volumes up 3% and prices down 2%. The largest increases were in:
  • household electrical items, up $118m (9%), with volumes up 19% and prices down 8%
  • textiles, clothing and footwear, up $75m (4%), with volumes up 8% and prices down 3%
  • food and beverages, mainly for consumption, up $54m (3%), with volumes up 3% and prices down 1%.

Partly offsetting these increases was a fall in the non-industrial transport equipment component, down $173m (4%), with volumes down 3% and prices down 1%.

Imports of capital goods, in seasonally adjusted terms at current prices, fell $260m (2%) to $11,710m, with prices down 2%. The largest decreases were in:
  • civil aircraft, down $104m (11%) with volumes down 7% and prices down 4%
  • machinery and industrial equipment, down $76m (2%), with volumes down 1% and prices down 1%
  • ADP equipment, down $68m (4%), with prices down 4%
  • telecommunications equipment, down $66m (5%), with prices down 5%.

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $1,697m (7%) to $24,883m, with volumes up 2% and prices up 5%. The largest increases were in:
  • fuels and lubricants, up $903m (11%), with volumes down 5% and prices up 17%
  • processed industrial supplies, n.e.s., up $373m (7%), with volumes up 4% and prices up 3%
  • iron and steel, up $174m (20%), with volumes up 17% and prices up 2%
  • other parts for capital goods, up $168m (6%), with volumes up 8% and prices down 3%.

Imports of other goods, in seasonally adjusted terms at current prices, rose $146m (6%) to $2,704m. The components contributing to the rise were goods for processing, up $97m (159%), with volumes up 122% and prices up 16%, and non-monetary gold, up $60m (3%), with volumes up 11% and prices down 7%.

General Merchandise Debits, Chain volume measures(a)
Graph: General Merchandise Debits(a)



Services

The trend estimate of net services at current prices was a surplus of $977m, an increase of $216m (28%) on the March quarter 2008 surplus of $761m.

In seasonally adjusted terms at current prices, net services recorded a surplus of $1,069m, an increase of $361m (51%) on the March quarter 2008 surplus of $708m.

Services credits, in seasonally adjusted terms at current prices, rose $550m (4%) to $13,456m, with volumes up 3% and prices up 1%. All components contributed to the rise with:
  • travel services, up $351m (5%), with volumes up 3% and prices up 1%
  • other services, up $110m (3%), with volumes up 3% and prices up 1%
  • transportation services, up $89m (4%), with volumes up 3% and prices up 1%.

Services debits, in seasonally adjusted terms at current prices, rose $189m (2%) to $12,388m, with volumes up 3% and prices down 2%. All components contributed to the rise with:
  • other services, up $96m (3%), with volumes up 4% and prices down 2%
  • travel services, up $83m (2%), with volumes up 4% and prices down 2%
  • transportation services, up $10m, with volumes up 1% and prices down 1%.

Seasonally adjusted, tourism related services credits rose $297m (4%) to $8,542m, and tourism related services debits rose $82m (1%) to $6,433m.


IMPLICIT PRICE DEFLATOR

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits rose 13.7%. In original terms, it rose 13.4%. The chain Laspeyres price index for goods and services credits rose 13.6%. In original terms, the IPD for goods credits rose 16.8% and the IPD for services credits rose 1.1%.

The total goods and services debits IPD rose 0.5% in seasonally adjusted terms. In original terms, it rose 0.2% and the chain Laspeyres price index for goods and services debits rose 1.2%. In original terms, the IPD for goods debits rose 0.6% and the IPD for services debits fell 1.4%.

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 16.8% while the chain Laspeyres price index rose 16.9%. The export price index (EPI) rose 13.5% during the June quarter 2008.

In original terms, the implicit price deflator for total goods debits rose 0.6% while the chain Laspeyres price index rose 1.8%. The import price index (IPI) rose 1.4% during the June quarter 2008.


Terms of trade

Australia's seasonally adjusted terms of trade rose 13.1% to 124.6, with an increase of 13.7% in the IPD for goods and services credits and an increase of 0.5% in the goods and services debits IPD. The trend estimate of the terms of trade increased 10.6% to 123.0.


Income

The trend estimate of the net income deficit increased $358m (3%) to $13,067m.

In seasonally adjusted terms the net income deficit increased $797m (6%) to $13,284m. Income debits increased $1,110m (5%) to $23,777m and income credits rose $314m (3%) to $10,493m. The main component contributing to the rise in income debits was a $711m (8%) increase in direct investment in Australia, income on equity. The main driver to the increase in income credits was a $264m (5%) increase in direct investment abroad, income on equity.

In original terms the net income deficit rose $54m to $12,154m. Income credits increased $873m (8%) to $11,155m. Income debits increased $927m (4%) to $23,309m.

Net Income
Graph: Net Income



Current Transfers

In seasonally adjusted terms, the net current transfers deficit was $50m, an increase of $9m (22%) on the $41m deficit recorded in March quarter 2008. Current transfer credits fell $17m (1%) and current transfer debits fell $9m (1%) in the June quarter 2008.


CAPITAL AND FINANCIAL ACCOUNT

Capital Account

In original terms, the capital account surplus was $563m, down $62m (10%) on the March quarter 2008 surplus. Capital transfer credits fell $126m (13%) to $828m and capital transfer debits fell $70m (21%) to $265m.


Financial Account

The balance on financial account recorded a net inflow of $10.4b, with a $6.9b net inflow of equity and a $3.5b net inflow of debt.

The financial account surplus fell significantly in the June quarter 2008 in line with the fall in the current account deficit. The main contributors to this fall were a decrease of $14.5b in net issues of bonds and notes and a decrease of $17.3b in net issues of money market securities by depository corporations, though aggregate offshore borrowings by depository corporations has returned to more normal levels after the record highs observed in the March quarter 2008. This was partly offset by an increase of $7.7b in portfolio equity liabilities.

Direct investment in Australia recorded an inflow of $3.6b in the June quarter 2008, a decrease of $9.8b on the March quarter 2008 inflow of $13.3b. Australia's direct investment abroad recorded an outflow of $12.9b, an increase of $3.1b on the previous quarter's outflow of $9.8b. In net terms, direct investment recorded an outflow of $9.3b in the June quarter 2008, a turnaround of $12.9b on the March quarter 2008 inflow of $3.5b.

Portfolio investment recorded a net inflow of $21.1b, a decrease of $17.0b on the net inflow of $38.2b in the March quarter 2008. This was driven by a decrease in portfolio investment debt securities liabilities down $22.6b on the March quarter 2008 to $16.6b.

Other investment recorded a net outflow of $1.1b, a decrease of $19.3b on the net outflow of $20.4b in the previous quarter.

Reserve assets recorded a net outflow of $2.0b, a decrease of $3.4b on the previous quarter's net outflow of $5.4b.


INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position at 30 June 2008 was a net foreign liability of $692.1b, up $5.0b (1%) on 31 March 2008. The increase consisted of:
  • exchange rate changes of $15.8b
  • net transactions of $10.4b
  • price change of -$21.3b.

During the June quarter 2008 the level of net foreign equity rose $9.5b (11%) to $92.2b. Increases due to exchange rate changes of $21.7b, transactions of $6.9b and other changes of $0.4b were partially offset by decreases due to price changes of -$19.5b.

The level of net foreign debt fell by $4.5b (1%) to $600.0b. Decreases due to exchange rate changes of -$5.9b, market price changes of -$1.8b and other changes of -$0.3b were partially offset by transactions of $3.5b.


FINANCIAL YEAR: 2007-2008 SITUATION

Balance of Payments

In original terms, the balance on current account for 2007-08 was a deficit of $68.2b, a 17% increase on the deficit of $58.4b recorded for 2006-07. The balance on goods and services deficit was $17.9b, an increase of $5.7b on the deficit of $12.2b recorded in 2006-07. Goods credits increased $14.6b or 9% (due to increases in volumes and prices) and goods debits increased $21.4b or 12% (due largely to an increase in volumes).

The 2007-08 services surplus of $2.9b was an increase of $1.0b on the surplus of $1.8b in 2006-07.

The 2007-08 net income deficit rose $4.3b (9%), with an increase in income credits of $4.6b (13%) and an increase in income debits of $8.9b (11%).

The balance on financial account recorded a net inflow of $65.1b, with a net inflow on debt of $80.5b and a net outflow on equity of $15.5b. This result was up $8.3b on the net inflow recorded for the previous year as a result of:
  • a turnaround of $64.4b to a net inflow on reserve assets
  • a decrease of $51.9b on the net inflow on portfolio investment
  • a turnaround of $14.1b to a net outflow on financial derivatives
  • an increase of $5.3b on the net inflow on other investment
  • an increase of $4.6b on the net inflow on direct investment.


International Investment Position

Australia's net international investment position as at 30 June 2008 was a net foreign liability of $692.1b. This was up $65.8b (10%) on the position a year earlier as a result of:
  • net transactions of $65.1b
  • exchange rate changes of $19.2b
  • other adjustments of $0.2b
  • price changes of -$18.7b.

During the 2007-08, the level of net foreign equity increased to $92.2b, up $13.2b (17%) on the previous financial year with exchange rate changes of $35.5b and other changes of $0.4b partially offset by transactions of -$15.5b and price changes of -$7.2b.

Net foreign debt rose to $600.0b, up $52.5b (10%) on the previous financial year, with transactions of $80.5b partially offset by exchange rate changes of -$16.3b, price changes of -$11.5b and other changes of -$0.2b.

At 30 June 2008, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 31 March 2008 using current prices) was 62.5%. This compares with 59.8% one year ago and 51.4% one decade ago.


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