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5302.0 - Balance of Payments and International Investment Position, Australia, Jun 2010 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 31/08/2010   
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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 2010 was a deficit of $7,141m in current price terms. This was a decrease of $9,463m (57%) on the deficit recorded for the March quarter 2010 where:

  • the goods and services deficit turnaround of $9,201m resulted in a surplus of $5,664m
  • the primary income deficit fell $262m (2%) to $12,588m
  • the secondary income deficit fell $1m to $217m.

In seasonally adjusted current price terms, the current account deficit fell $10,817m (66%) to $5,640m between the March quarter 2010 and June quarter 2010 where:
  • the goods and services deficit turnaround of $9,706m resulted in a surplus of $6,497m
  • the primary income deficit fell $1,112m (9%) to $11,909m
  • the secondary income deficit remained steady at $227m.


Goods and Services

The trend estimate of the balance on goods and services at current prices was a surplus of $5,664m, a turnaround of $9,201m on the March quarter 2010 deficit.

In seasonally adjusted terms, the balance on goods and services was a surplus of $6,497m, a turnaround of $9,706m on the March quarter 2010 deficit where:
  • the net goods turnaround of $10,119m resulted in a surplus of $7,434m
  • the net services deficit rose $413m (79%) to $937m.

The net goods surplus resulted from an increase in goods credits (exports), up $12,868m (26%) exceeding an increase in goods debits (imports), up $2,750m (5%).

Contributing to the increase in goods credits were:
  • non-rural goods, up $11,242m (29%)
  • non-monetary gold, up $1,211m (36%)
  • rural goods, up $379m (6%).

Contributing to the increase in goods debits were:
  • non-monetary gold, up $956m (68%)
  • consumption goods, up $675m (4%)
  • intermediate and other merchandise goods, up $640m (3%)
  • capital goods, up $479m (4%).

In seasonally adjusted terms, the increase in the services deficit resulted from a decrease in services credits (exports), down $122m (1%) and an increase in services debits (imports), up $291m (2%).

In seasonally adjusted volume terms, the balance on goods and services was a deficit of $6,434m, a decrease of $1,260m (16%) on the March quarter 2010 deficit. The net deficit on goods decreased $1,597m (27%) to $4,344m. Goods credits rose $3,450m (7%) and goods debits rose $1,853m (3%). The net deficit on services increased $337m (19%) to $2,090m. Services credits fell $144m (1%) and services debits rose $193m (1%).

The decrease of $1,260m in the deficit on goods and services in seasonally adjusted volume terms is expected to contribute 0.4 percentage points to growth in the June quarter 2010 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the March quarter 2010.

Goods and Services, CHAIN VOLUME MEASURES (a)
Graph: Goods and Services, CHAIN VOLUME MEASURES (a)



Goods Credits

The trend estimate of goods credits at current prices rose $10,657m (22%) to $59,837m in the June quarter 2010.

In seasonally adjusted terms at current prices, goods credits rose $12,868m (26%) to $61,621m.

Exports of rural goods, in seasonally adjusted terms at current prices, rose $379m (6%) to $6,797m, with volumes up 1% and prices up 5%. The increases were in:
  • meat and meat preparations, up $261m (17%), with volumes up 8% and prices up 8%
  • other rural, up $159m (5%), with volumes up 2% and prices up 4%.

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $11,242m (29%) to $50,197m, with volumes up 8% and prices up 20%. The largest increases were in:
  • metal ores and minerals, up $5,616m (43%), with volumes up 3% and prices up 39%
  • coal, coke and briquettes, up $4,000m (52%), with volumes up 22% and prices up 25%
  • other mineral fuels, up $972m (20%), with volumes up 17% and prices up 2%
  • other non-rural (incl. sugar and beverages), up $296m (10%), with volumes up 4% and prices up 6%.

Net exports of goods under merchanting, in seasonally adjusted terms at current prices, rose $36m (97%) to $73m, with volumes up 51% and prices up 32%.

Exports of non-monetary gold, in seasonally adjusted terms at current prices, rose $1,211m (36%) to $4,554m, with volumes up 21% and prices up 12%.

Goods Credits, CHAIN VOLUME MEASURES (a)
Graph: Goods Credits, CHAIN VOLUME MEASURES (a)



Goods Debits

The trend estimate of goods debits at current prices rose $1,095m (2%) to $53,289m in the June quarter 2010.

In seasonally adjusted terms at current prices, goods debits rose $2,750m (5%) to $54,188m.

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $675m (4%) to $16,308m, with volumes up 4%. The largest increases were in:
  • non-industrial transport equipment, up $215m (5%), with volumes up 7% and prices down 2%
  • consumption goods n.e.s., up $144m (3%), with volumes up 1% and prices up 2%
  • household electrical items, up $140m (11%), with volumes up 19% and prices down 7%
  • food and beverages, mainly for consumption, up $92m (4%), with volumes up 2% and prices up 2%.

Imports of capital goods, in seasonally adjusted terms at current prices, rose $479m (4%) to $12,496m with volumes up 5% and prices down 1%. The largest increases were in:
  • machinery and industrial equipment, up $475m (13%), with volumes up 14% and prices down 1%
  • ADP equipment, up $197m (10%), with volumes up 9% and prices up 1%
  • industrial transport equipment n.e.s., up $194m (11%), with volumes up 16% and prices down 5%.

Partly offsetting these increases was capital goods n.e.s., down $468m (25%), with volumes down 26% and prices up 2%.

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $640m (3%) to $23,016m with prices up 3%. The largest increases were in:
  • fuels and lubricants, up $879m (14%), with volumes up 7% and prices up 6%
  • iron and steel, up $154m (19%), with volumes up 17% and prices up 2%.

Partly offsetting these increases were:
  • other merchandise goods, down $363m (60%) with volumes down 60% and prices up 2%
  • other parts for capital goods, down $196m (6%) with volumes down 5% and prices down 1%.

Imports of non-monetary gold, in seasonally adjusted terms at current prices, rose $956m (68%) to $2,368m with volumes up 52% and prices up 11%.

Goods Debits, CHAIN VOLUME MEASURES (a)
Graph: Goods Debits, CHAIN VOLUME MEASURES (a)



Services

The trend estimate of net services at current prices was a deficit of $884m, an increase of $362m (69%) on the revised March quarter 2010 deficit of $522m.

In seasonally adjusted terms at current prices, net services recorded a deficit of $937m, an increase of $413m (79%) on the revised March quarter 2010 deficit of $524m.

Services credits, in seasonally adjusted terms at current prices, fell $122m (1%) to $13,022m with volumes down 1%. The largest decreases were in:
  • travel services, down $82m (1%) with volumes down 1%
  • transport services, down $47m (3%), with volumes down 3%
  • manufacturing services on physical inputs owned by others, down $25m (33%), with volumes down 34%.

Partly offsetting these decreases was other services, up $36m (1%), with volumes up 1%.

Services debits, in seasonally adjusted terms at current prices, rose $291m (2%) to $13,959m, with volumes up 1% and prices up 1%. The only increase was in transport services, up $352m (10%), with volumes up 9% and prices up 1%. Freight transport increased $276m (13%).

Partly offsetting the increase in transport services were:
  • travel services, down $28m, with volumes down 1% and prices up 1%
  • other services, down $19m, with volumes down 1% and prices up 1%.

In seasonally adjusted terms at current prices, tourism related services credits fell $121m (1%) to $8,881m and tourism related services debits rose $52m (1%) to $7,328m.


IMPLICIT PRICE DEFLATOR(footnote 1)

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits rose 14.2%. In original terms, it increased 14.3% and the chain Laspeyres price index for goods and services credits rose 12.6%. In original terms, the IPD for goods credits rose 17.8% and the IPD for services credits rose 0.2%.

In seasonally adjusted terms, the IPD for total goods and services debits rose 1.6%. In original terms, it increased 1.5% while the chain Laspeyres price index for goods and services debits rose 1.5%. In original terms, the IPD for goods debits rose 1.6% and the IPD for services debits rose 0.8%.

Implicit Price Deflator, (a)
Graph: Implicit Price Deflator, (a)



Relationship to IPI and EPI

In original terms, the implicit price deflator (IPD) for total goods credits rose 17.8% and the chain Laspeyres price index for goods credits rose 16.1%. The export price index (EPI) rose 16.1% during the June quarter 2010.

The difference between the EPI and IPD is driven by other mineral fuels and other non-rural goods. Differences in these two measures result from differences in pricing points, coverage and weights.

In original terms, the implicit price deflator for total goods debits rose 1.6% and the chain Laspeyres price index for goods imports rose 1.7%. The import price index (IPI) rose 1.9% during the June quarter 2010.


Terms of Trade

Australia's seasonally adjusted terms of trade for net goods and services rose 12.5% to 120.8, with an increase of 14.2% in the IPD for goods and services credits and an increase of 1.6% in the IPD for goods and services debits. The trend estimate of the terms of trade for net goods and services increased 14.4% to 120.9.


Primary Income

The trend estimate of the net primary income deficit decreased $262m (2%) from $12,850m in the March quarter 2010 to $12,588m in the June quarter 2010.

In seasonally adjusted terms the net primary income deficit decreased $1,112m (9%) from $13,021m in the March quarter 2010 to $11,909m in the June quarter 2010. Primary income credits increased $1,000m (11%) to $10,021m and primary income debits decreased $111m (1%) to $21,931m.

The main contributors to the increase in primary income credits were:
  • a $797m (28%) increase in income on direct investment assets, particularly investment income on equity and investment fund shares
  • a $199m (4%) increase in income on portfolio investment assets.

The main contributors to the decrease in primary income debits were:
  • a $113m (1%) decrease in income on portfolio investment liabilities
  • a $59m (8%) decrease in income on other investment liabilities
  • a $59m (1%) decrease in income on direct investment liabilities.

In original terms the primary income deficit decreased $886m (7%) to $11,699m in the June quarter 2010. Primary income credits increased $1,099m (12%) to $10,292m and primary income debits increased $213m (1%) to $21,991m.

NET PRIMARY INCOME
Graph: NET PRIMARY INCOME



Secondary Income

In seasonally adjusted terms, the net secondary income balance was a deficit of $227m, remaining steady from the March quarter 2010 deficit. Secondary income credits rose $16m (1%) and secondary income debits rose $17m (1%) in the June quarter 2010.


CAPITAL ACCOUNT

In original terms, the capital account deficit was $42m, up $5m (14%) on the March quarter 2010 deficit of $37m.


FINANCIAL ACCOUNT

The balance on financial account recorded a net inflow of $4.3b, with a net inflow $0.9b of debt and a net inflow of $3.5b of equity.

The financial account surplus decreased $11.8b from $16.1b in the March quarter 2010 to $4.3b in the June quarter 2010 in line with the decrease in the current account deficit, which fell $11.4b from $15.6b last quarter to $4.2b this quarter.

Direct investment recorded a net outflow of $1.2b in the June quarter 2010, a turnaround of $7.9b from the net inflow of $6.7b in the March quarter 2010, where:
  • direct investment assets recorded an outflow of $8.8b, an increase of $7.7b on the outflow of $1.2b in the March quarter 2010
  • direct investment liabilities recorded an inflow of $7.6b, a decrease of $0.3b on the inflow of $7.9b in the March quarter 2010.

Portfolio investment recorded a net inflow $18.3b, a decrease of $2.1b on the net inflow of $20.5b in the March quarter 2010. This was driven by:
  • debt securities recording a net inflow of $19.2b
  • equity and investment fund shares recording a net outflow of $0.8b.

Portfolio liabilities debt securities inflow decreased $20.0b from $43.9b in the March quarter 2010 to $23.8b in the June quarter 2010. The main contributor was long-term debt securities of deposit-taking corporations, except the central bank.

Financial derivatives recorded a net outflow of $5.3b, a turnaround of $13.5b from the net inflow of $8.2b in the March quarter 2010.

Other investment recorded a net outflow of $7.2b, a decrease of $15.4b from the net outflow of $22.6b in the March quarter 2010.

Reserve assets recorded a net outflow of $0.3b, a turnaround of $3.6b from the net inflow of $3.3b in the March quarter 2010.


INTERNATIONAL INVESTMENT POSITION


INTERNATIONAL INVESTMENT

Australia's net international investment position at 30 June 2010 was a net foreign liability of $763.5b, up $4.2b (1%) on the 31 March 2010 position of $759.3b. The increase consisted of:
  • price changes of $11.4b
  • net transactions of $4.3b
  • exchange rate changes of -$10.3b
  • other changes of -$1.3b.

During the June quarter 2010 Australia's net foreign equity liabilities fell $10.0b (10%) to $91.6b. This decrease was due to:
  • exchange rate changes of -$23.0b
  • other changes of -$1.5b
  • price changes of $11.0b
  • transactions of $3.5b.

During the June quarter 2010 Australia's net foreign debt liability increased $14.1b (2%) to $671.9b. This increase was due to:
  • exchange rate changes of $12.7b
  • transactions of $0.9b
  • price changes of $0.4b
  • other changes of $0.1b.


FINANCIAL YEAR: 2009-2010 SITUATION


CURRENT ACCOUNT

In original terms, the balance on current account for 2009-10 was a deficit of $56.1b, a 38% increase on the deficit of $40.5b recorded for 2008-09. The balance on goods and services deficit was $6.0b, a turnaround of $11.9b on the surplus of $5.9b recorded in 2008-09. Goods credits decreased $30.1b (13%) and goods debits decreased $16.4b (7%).

The 2009-10 services deficit of $1.4b was a decrease of $1.9b (57%) on the deficit of $3.3b in 2008-09.

The 2009-10 net primary income deficit increased $3.8b (8%), with a decrease in primary income credits of $6.9b (16%) and a decrease in primary income debits of $3.1b (4%).

The 2009-10 secondary income deficit decreased $0.08b (8%), with a decrease in secondary income credits of $0.3b (4%) and a decrease in secondary income debits of $0.4b (5%).


FINANCIAL ACCOUNT

The balance on financial account recorded a net inflow of $56.7b, with a net outflow on equity of $9.0b and a net inflow on debt of $65.7b. This result was up $16.3b on the net inflow of $40.5b recorded for the previous year as a result of:
  • an increase of $18.9b on the net inflow on portfolio investment
  • an increase of $18.0b on the net outflow on other investment
  • a turnaround of $17.8b to a net inflow on reserve assets
  • an increase of $2.2b on the net outflow on financial derivatives
  • a decrease of $0.3b on the net inflow on direct investment.


INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position as at 30 June 2010 was a net foreign liability of $763.5b. This was up $59.8b (8%) on the position a year earlier as a result of:
  • net transactions of $56.7b
  • price changes of $3.6b
  • exchange rate changes of $1.8b
  • other changes of -$2.4b.

During 2009-10, Australia's net foreign equity liability increased to $91.6b, up $12.2b (15%) on the previous financial year, with price changes of $17.1b and exchange rate changes of $9.9b partially offset by net transactions of -$9.0b and other changes of -$5.9b.

Australia's net foreign debt liability rose to $671.9b, up $47.6b (8%) on the previous financial year, with net transactions of $65.7b and other changes of $3.5b partially offset by price changes of -$13.5b and exchange rate changes of -$8.1b.

At 30 June 2010, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 31 March 2010 using current prices) was 60.2%. This compares with 56.0% one year ago and 49.1% one decade ago.

1 In this commentary movements in indexes are based on data to four decimal places. <back

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