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5302.0 - Balance of Payments and International Investment Position, Australia, Sep 2007  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 30/11/2007   
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

The trend estimate of the balance on current account for the September quarter 2007 was a deficit of $15,630m, an increase of $72m on the deficit recorded for the June quarter 2007 where:

  • the goods and services deficit rose $341m (9%) to $4,268m
  • the income deficit fell $258m (2%) to $11,275m
  • the current transfers deficit fell $11m (11%) to $87m.

In seasonally adjusted terms, the current account deficit fell $33m to $15,587m between the June quarter 2007 and September quarter 2007 where:
  • the goods and services deficit rose $522m (14%) to $4,387m
  • the income deficit fell $471m (4%) to $11,149m
  • the current transfers deficit fell $84m (62%) to $51m.


Goods and Services

The trend estimate of the balance on goods and services at current prices was a deficit of $4,268m, an increase of $341m (9%) on the June quarter 2007 deficit.


In seasonally adjusted terms, the balance on goods and services was a deficit of $4,387m, an increase of $522m (14%) on the June quarter 2007 deficit where:

  • the net goods deficit rose $584m (13%) to $5,002m
  • the net services surplus rose $62m (11%) to $615m.

The increase in the goods deficit resulted from higher goods debits (imports), up $476m (1%), and lower goods credits (exports), down $109m.


The increase in goods debits was driven by:

  • other goods, up $315m (16%)
  • consumption goods, up $145m (1%)
  • intermediate and other merchandise goods, up $81m
  • partly offset by capital goods, down $65m (1%).

The decrease in goods credits was driven by the other goods component, down $220m (6%), partly offset by:
  • non-rural goods, up $105m
  • rural goods, up $6m.

The increase in the services surplus resulted from higher services credits, up $372m (3%), and from higher services debits, up $310m (3%).


In seasonally adjusted volume terms, the deficit on goods and services was $8,205m, an increase of $184m (2%) on the $8,021m deficit recorded in the June quarter 2007. The net deficit on goods fell $47m (1%) to $7,865m. Goods credits rose $982m (2%) and goods debits rose $935m (2%). The net services balance was a deficit of $340m, an increase of $230m on the deficit of $110m in June quarter 2007.


The increase of $184m in the deficit on goods and services in volume terms could be expected to make no contribution to growth in the September quarter 2007 volume measures of GDP, assuming no significant revision to the GDP chain volume estimate for the June quarter 2007.

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




Goods Credits

The trend estimate of goods credits rose $36m to $42,588m in the September quarter 2007.


In seasonally adjusted current price terms, goods credits fell $109m to $42,508m.


Exports of rural goods, in seasonally adjusted terms at current prices, rose $6m to $5,798m, with volumes down 2% and prices up 2%. The increases were in:

  • cereal grains and cereal preparations, up $90m (11%), with volumes up 7% and prices up 4%
  • meat and meat preparations, up $83m (5%), with volumes up 4% and prices up 1%
  • other rural, up $24m (1%), with volumes down 4% and prices up 5%.

Partly offsetting these increases was the wool and sheepskins component, down $189m (23%), with volumes down 23%.


Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $105m to $33,372m, with volumes up 4% and prices down 3%. The largest increases were in:

  • metal ores and minerals, up $612m (7%), with volumes up 11% and prices down 4%
  • other manufactures, up $282m (7%), with volumes up 8% and prices down 1%
  • transport equipment, up $196m (16%), with volumes up 17% and prices down 1%.

Largely offsetting these increases were falls in:
  • other non-rural (including sugar and beverages), down $475m (12%), with volumes down 1% and prices down 11%
  • other mineral fuels, down $435m (11%), with volumes down 11% and prices up 1%.

Exports of other goods, in seasonally adjusted terms at current prices, fell $220m (6%) to $3,338m. The main contributor to this decrease was the non-monetary gold component, down $159m (5%), with volumes down 1% and prices down 4%.

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




Goods Debits

The trend estimate of goods debits rose $452m (1%) to $47,491m in the September quarter 2007.


In seasonally adjusted current price terms, goods debits rose $476m (1%) to $47,511m.


Imports of consumption goods, in seasonally adjusted terms at current prices, rose $145m (1%) to $14,006m, with volumes up 2% and prices down 1%. The largest increases were in:

  • food and beverages, mainly for consumption, up $192m (11%), with volumes up 8% and prices up 2%
  • household electrical items, up $100m (9%), with volumes up 15% and prices down 6%.

Partly offsetting these increases were falls in:
  • consumption goods n.e.s., down $101m (2%), with volumes down 2% and prices down 1%
  • toys, books and leisure goods, down $50m (4%), with volumes down 3% and prices down 2%.

Imports of capital goods, in seasonally adjusted terms at current prices, fell $65m (1%) to $10,557m, with volumes up 2% and prices down 2%. The main contributor to this decrease was the civil aircraft component, down $327m, mainly on volumes.


Largely offsetting this decrease were rises in:

  • machinery and industrial equipment, up $108m (3%), with volumes up 5% and prices down 2%
  • industrial transport equipment n.e.s., up $90m (6%), with volumes up 6%
  • capital goods n.e.s., up $39m (3%), with volumes up 3% and prices down 1%.

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $81m to $20,658m, with volumes up 1%. The largest increases were in:
  • organic and inorganic chemicals, up $179m (17%), with volumes up 17%
  • fuels and lubricants, up $103m (2%), with volumes down 1% and prices up 3%
  • parts for transport equipment, up $70m (3%), with volumes up 6% and prices down 2%.

Partly offsetting these increases were falls in:
  • other parts for capital goods, down $92m (3%), with volumes down 1% and prices down 2%
  • other merchandise goods, down $70m (19%), with volumes down 18% and prices down 1%
  • processed industrial supplies n.e.s., down $54m (1%), with volumes up 2% and prices down 3%.

Imports of other goods, in seasonally adjusted terms at current prices, rose $315m (16%) to $2,289m. The largest increases were in:
  • non-monetary gold, up $272m (17%), on increased volumes
  • goods procured in ports by carriers, up $30m (9%), largely on increased volumes.
General Merchandise Debits(a)
Graph: General Merchandise Debits(a)




Services

The trend estimate of net services at current prices was a surplus of $635m, an increase of $75m (13%) on the June quarter 2007 surplus of $560m.


In seasonally adjusted current price terms, net services recorded a surplus of $615m, an increase of $62m (11%) on the June quarter 2007 surplus of $553m.


Services credits, in seasonally adjusted terms at current prices, rose $372m (3%) to $12,320m, with volumes up 2% and prices up 1%. All components contributed to the rise in the seasonally adjusted series with:

  • transportation services, up $172m (8%), with volumes up 5% and prices up 3%
  • travel services, up $110m (2%), with prices up 1%
  • other services, up $91m (3%), with volumes up 2% and prices up 1%.

Services debits, in seasonally adjusted terms at current prices, rose $310m (3%) to $11,705m, with volumes up 4% and prices down 1%. All components contributed to the rise in the seasonally adjusted series with:
  • transportation services, up $152m (4%), with volumes up 5% and prices down 1%
  • other services, up $120m (3%), with volumes up 5% and prices down 1%
  • travel services, up $37m (1%), with volumes up 2% and prices down 1%.

Seasonally adjusted, tourism related services credits rose $105m (1%) to $7,800m, and tourism related services debits rose $89m (2%) to $5,963m.



IMPLICIT PRICE DEFLATOR

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits fell 1.8%. In original terms, it fell by 2.0%. The chain Laspeyres price index for goods and services credits fell 2.0%. In original terms, the IPD for goods credits fell 2.9% while the IPD for services credits rose 1.4%.


The total goods and services debits IPD fell 0.9% in seasonally adjusted terms. In original terms, it fell by 0.8% and the chain Laspeyres price index for goods and services debits fell 0.6%. In original terms, the IPD for goods debits fell 0.9% while the IPD for services debits fell 0.5%.

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 fell 2.9% while the chain Laspeyres price index for goods exports fell 2.8%. The export price index (EPI) fell 3.0% during the September quarter 2007.


In original terms, the implicit price deflator for total goods debits fell 0.9% while the chain Laspeyres price index for goods imports fell 0.6%. The import price index (IPI) fell 0.8% during the September quarter 2007.



Terms of trade

Australia's seasonally adjusted terms of trade fell 0.8% to 107.0, with a decrease of 1.8% in the IPD for goods and services credits and also a 0.9% decrease in the goods and services debits IPD. The trend estimate of the terms of trade decreased 0.1% to 107.6.



Income

The trend estimate of the net income deficit decreased $258m (2%) to $11,275m.


In seasonally adjusted terms the net income deficit fell $471m (4%) to $11,149m. Income credits fell $56m (1%) to $9,330m while income debits fell $528m (3%) to $20,479m. The main driver of the decrease in income debits was a $364m (4%) fall in profits accruing to non-residents holding direct equity in Australia. In original terms these profits fell slightly whereas normally the September quarter is a seasonal high.


In original terms the net income deficit rose $1,902m (18%) to $12,523m. Income credits fell $896m (9%) to $8,871m mainly due to a decrease in profits accruing on direct investment equity held abroad of $658m (12%) to $4,924m. Income accruing on the other investment category decreased by $143m (12%) to $1,088m and dividends received on portfolio equity held abroad decreased by $102m (10%) to $919m during the quarter. Income debits increased $1,006m (5%) to $21,394m primarily due to an increase in portfolio investment equity dividend payments by resident enterprises to non-residents which is highly seasonal of $1,086m (68%) to $2,692m . This was partially offset by a decrease in income accruing on portfolio debt held by non-residents of $133m (2%) to $7,009m and a decrease in profits accruing to non-residents holding direct equity in Australia of $103m (1%) to $9,064m.

Net Income
Graph: Net Income




Current Transfers

In seasonally adjusted terms, the net current transfers deficit was $51m, a decrease of $84m (62%) on the $135m deficit recorded in the June quarter 2007. Current transfer credits rose $31m (2%) and current transfer debits fell $53m (4%).



CAPITAL AND FINANCIAL ACCOUNT

Capital Account

In original terms, the capital account surplus was $598m, up $153m (34%) on the revised June quarter 2007 surplus. Capital transfer credits rose $132m (19%) to $829m and capital transfer debits fell $21m (8%) to $231m.



Financial Account

The main influence on the financial account has been the reaction to events in foreign sub-prime mortgage markets. The higher cost of raising debt has led to a reduction in issuance of debt securities by Australian residents (down $16.2b) and a reduction in borrowing by Australian residents (loans down $20.2b). Similarly, there was a reduction in the purchase of debt securities (down $2.6b) with no new issues of Kangaroo bonds into the Australian market. Lending by Australian residents also fell (loans down $22.6b) with capital shifted into deposits (up $12.0b).


Due to the maturation of foreign exchange swaps executed for domestic liquidity management purposes, the Reserve Bank reduced its holdings of foreign exchange by $28.0b.


In original terms, the balance on financial account recorded a net inflow of $17.4b, with a $29.8b inflow of debt partly offset by a $12.4b outflow of equity.


Direct investment in Australia recorded an inflow of $11.2b in the September quarter 2007, an increase of $10.0b on the revised June quarter 2007 inflow of $1.2b. Australia's direct investment abroad recorded an outflow of $13.6b, an increase of $10.3b on the previous quarter's revised outflow of $3.2b. In net terms, direct investment recorded an outflow of $2.3b, an increase of $0.3b on the June 2007 outflow of $2.0b.


Portfolio investment recorded a net outflow of $5.8b, a turnaround of $22.9b on the net inflow of $17.1b in June quarter 2007. This largely reflects the significant tightening of credit markets for lower quality issuers associated with the sub-prime debt crisis in foreign markets.


Other investment recorded a net ouflow of $2.1b, a turnaround of $10.4b on the net inflow of $8.3b in the previous quarter.


Reserve assets recorded a net inflow of $28.1b, a turnaround of $38.2b on the previous quarter's net outflow of $10.1b.



INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position at 30 September 2007 was a net foreign liability of $658.8b, up $11.1b (2%) on 30 June 2007. The increase consisted of:

  • net transactions of $17.4b
  • exchange rate changes of $5.3b
  • price changes of -$11.7b.

During the September quarter 2007 the level of net foreign debt rose by $24.0b (4%) to a liability of $570.0b. An increase in net debt raisings of $29.8b was partially offset by exchange rate changes of -$3.0b, price changes of -$2.3b and other changes of -$0.5b.


During the September quarter 2007 net foreign equity fell $12.9b (13%) to close at a liability of $88.8b. The contributors to this decrease were net transactions of -$12.4b and price changes of -$9.4b partially offset by exchange rate changes of $8.4b and other changes of $0.5b.


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