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5302.0 - Balance of Payments and International Investment Position, Australia, June 2012 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 04/09/2012   
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

In original current price terms, the June quarter 2012 current account deficit was $8,144m, a fall of $6,450m (44%) on the March quarter 2012 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 - June Quarter 2012

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

Seasonally Adjusted

Balance on current account
-11 801
1 196
9.2
Balance on goods and services
-1 382
631
31.3
Net goods
802
559
230.0
Net services
-2 184
72
3.2
Net primary income
-10 199
520
4.9
Net secondary income
-220
45
17.0

Trend

Balance on current account
-13 371
-1 949
-17.1
Balance on goods and services
-2 707
-2 374
-712.9
Net goods
-512
-2 491
. .
Net services
-2 196
116
5.0
Net primary income
-10 426
416
3.8
Net secondary income
-238
9
3.6

. . not applicable



VOLUMES AND PRICES

Goods and Services

In seasonally adjusted chain volume terms, the balance on goods and services was a deficit of $13,635m, a fall of $871m (6%) on the March quarter 2012 deficit of $14,506m.

The net deficit on goods fell $400m (4%) on the March quarter 2012 deficit of $10,143m. Goods credits rose $1,500m (3%) and goods debits rose $1,100m (2%). The net deficit on services fell $470m (11%) on the March quarter 2012 deficit of $4,362m.

The decrease in the balance on goods and services deficit, in seasonally adjusted chain volume terms, is expected to contribute 0.3 percentage points to growth in the June quarter 2012 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the March quarter 2012.

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 0.6% to 118.2 with an increase of 1.6% in the implicit price deflator (IPD) for goods and services credits and an increase of 2.2% in the IPD for goods and services debits.

In trend terms, the terms of trade for net goods and services fell 2.9% to 116.9.

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 deficit of $512m, a turnaround of $2,491m on the March quarter 2012 surplus of $1,979m.

In seasonally adjusted terms at current prices, net goods was a surplus of $802m, an increase of $559m on the March quarter 2012 surplus of $243m.

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

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

Exports
2 858
4.5
2.8
1.7
Rural goods
750
9.2
6.9
2.2
Non-rural goods
1 047
2.0
0.4
1.7
Net exports of goods under merchanting
-
-
-5.5
5.0
Non-monetary gold
1 061
31.5
31.2
0.2
Imports
2 300
3.7
1.7
1.9
Consumption goods
144
0.9
-1.7
2.6
Capital goods
1 374
7.9
6.1
1.7
Intermediate and other merchandise goods
847
3.1
1.0
2.1
Non-monetary gold
-65
-4.3
-3.9
-0.4

- nil or rounded to zero (including null cells)



Services

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

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

Exports
201
1.6
0.9
0.6
Manufacturing services on physical inputs owned by others
-2
-33.3
-33.3
0.5
Maintenance and repair services n.i.e.
4
40.0
30.0
0.5
Transport
-26
-1.6
-2.6
1.1
Travel
183
2.4
1.8
0.6
Other services
43
1.2
0.5
0.7
Imports
130
0.9
-2.2
3.1
Manufacturing services on physical inputs owned by others
-
-
-
-
Maintenance and repair services n.i.e.
23
27.1
20.8
4.8
Transport
-17
-0.4
-1.3
0.8
Travel
-61
-0.9
-4.1
3.3
Other services
186
4.3
-0.4
4.8

- nil or rounded to zero (including null cells)



GOODS CREDITS

The trend estimate of goods credits at current prices fell $1,459m (2%) to $64,097m in the June quarter 2012.

In seasonally adjusted terms at current prices, goods credits rose $2,858m (5%) to $65,748m, with volumes up 3% and prices up 2%.


Rural Goods

Exports of rural goods, in seasonally adjusted terms at current prices, rose $750m (9%) to $8,875m, with volumes up 7% and prices up 2%. The main components contributing to the rise were:
  • other rural, up $494m (14%), with volumes up 12% and prices up 2%
  • cereal grains and cereal preparations, up $217m (10%), with volumes up 6% and prices up 4%.


Non-rural Goods

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $1,047m (2%) to $52,377m, with prices up 2%. The main components contributing to the rise were:
  • metal ores and minerals, up $1,919m (10%), with volumes up 6% and prices up 4%
  • other mineral fuels, up $343m (5%), with volumes up 2% and prices up 3%
  • other non-rural (incl. sugar and beverages), up $257m (10%), with volumes up 9% and prices up 1%.

Partly offsetting these rises was the coal, cokes and briquettes component, down $1,626m (13%), with volumes down 10% and prices down 3%.

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, remained steady at $64m, with volumes down 5% and prices up 5%.


Non-monetary Gold

Non-monetary gold, in original and seasonally adjusted terms at current prices, rose $1,061m (31%) to $4,432m, with volumes up 31%.


GOODS DEBITS

The trend estimate of goods debits at current prices rose $1,032m (2%) to $64,609m in the June quarter 2012.

In seasonally adjusted terms at current prices, goods debits rose $2,300m (4%) to $64,947m, with volumes up 2% and prices up 2%.


Consumption Goods

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $144m (1%) to $16,904m with volumes down 2% and prices up 3%. The main components contributing to the rise were:
  • non-industrial transport equipment, up $138m (3%), with volumes up 1% and prices up 2%
  • textiles, clothing and footwear, up $134m (6%), with volumes up 4% and prices up 3%.

Partly offsetting these rises was the toys, books and leisure goods component, down $93m (9%), with volumes down 11% and prices up 3%.


Capital Goods

Imports of capital goods, in seasonally adjusted terms at current prices, rose $1,374m (8%) to $18,757m with volumes up 6% and prices up 2%. The main components contributing to the rise were:
  • machinery and industrial equipment, up $470m (9%), with volumes up 8% and prices up 1%
  • industrial transport equipment n.e.s., up $395m (17%), with volumes up 19% and prices down 2%
  • civil aircraft and confidentialised items, up $285m (24%), with volumes up 19% and prices up 4%.


Intermediate and Other Merchandise Goods

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $847m (3%) to $27,843m, with volumes up 1% and prices up 2%. The main components contributing to the rise were:
  • processed industrial supplies n.e.s., up $396m (7%), with volumes up 5% and prices up 2%
  • parts for transport equipment, up $279m (11%), with volumes up 10% and prices up 1%
  • other parts for capital goods, up $165m (5%), with volumes up 3% and prices up 2%.


Non-monetary Gold

Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, fell $65m (4%) to $1,443m, with volumes down 4%.


SERVICES

The trend estimate of net services at current prices was a deficit of $2,196m, a fall of $116m (5%) on the March quarter 2012 deficit of $2,312m.

In seasonally adjusted terms at current prices, net services recorded a deficit of $2,184m, a fall of $72m (3%) on the March quarter 2012 deficit of $2,256m.


Services Credits

Services credits, in seasonally adjusted terms at current prices, rose $201m (2%) to $12,937m, with volumes up 1% and prices up 1%. The main component contributing to the rise was travel, up $183m (2%), with volumes up 2% and prices up 1%.

In seasonally adjusted terms, tourism related service credits rose $159m (2%) to $8,359m.


Services Debits

Services debits, in seasonally adjusted terms at current prices, rose $130m (1%) to $15,121m, with volumes down 2% and prices up 3%. The main component contributing to the rise was other services, up $186m (4%), with prices up 5%.

In seasonally adjusted terms, tourism related service debits fell $166m (2%) to $8,066m.


PRIMARY INCOME

The trend estimate of the net primary income deficit at current prices fell $416m (4%) in the June quarter 2012 to $10,426m.

In seasonally adjusted terms, the net primary income deficit fell $520m (5%) in the June quarter 2012 to $10,199m.

NET PRIMARY INCOME
Graph: NET PRIMARY INCOME



Primary Income Credits

Primary income credits, in seasonally adjusted terms at current prices, fell $835m (9%) to $8,987m. The main components contributing to the fall were:
  • direct investment assets, income on equity and investment fund shares, down $651m (16%)
  • portfolio investment assets, interest, down $273m (13%).

Partly offsetting these falls was a $125m (5%) rise in portfolio investment assets, investment income on equity and investment fund shares.


Primary Income Debits

Primary income debits, in seasonally adjusted terms at current prices, fell $1,356m (7%) to $19,186m. The main components contributing to the fall were:
  • direct investment liabilities, income on equity and investment fund shares, down $1,214m (11%)
  • portfolio investment liabilities, interest, down $826m (12%).

Partly offsetting these falls were:
  • portfolio investment liabilities, investment income on equity and investment fund shares, up $527m (17%)
  • direct investment liabilities, interest, up $194m (16%).


SECONDARY INCOME

The trend estimate of the net secondary income deficit at current prices, fell $9m (4%) to $238m in the June quarter 2012.

In seasonally adjusted terms, the net secondary income deficit at current prices, fell $45m (17%) to $220m in the June quarter 2012.


FINANCIAL ACCOUNT

The balance on financial account, in original terms, recorded a net inflow of $7.9b, with a net inflow of $1.6b of equity and a net inflow of $6.3b of debt.

The financial account surplus decreased $6.7b, from $14.6b in March quarter 2012 to $7.9b in June quarter 2012.

Direct investment recorded a net inflow of $10.8b in June quarter 2012, a decrease of $0.6b from the net inflow of $11.3b in March quarter 2012, where:
  • direct investment liabilities recorded an inflow of $10.1b, a decrease of $2.5b on the inflow of $12.6 in March quarter 2012
  • direct investment assets recorded an inflow of $0.7b, a turnaround of $1.9b from the outflow of $1.3b in March quarter 2012.

Portfolio investment recorded a net outflow of $11.7b, a turnaround of $26.9b from the net inflow of $15.2b in March quarter 2012, where:
  • equity and investment fund shares recorded a net outflow of $4.4b
  • debt securities recorded a net outflow of $8.2b, where portfolio investment liabilities debt securities recorded a turnaround of $19.0b to $3.3b of net maturities in June quarter 2012.

Financial derivatives recorded a net outflow of $2.8b, a decrease of $3.5b from the net outflow of $6.3b in March quarter 2012.

Other investment recorded a net inflow of $8.8b, a turnaround of $9.8b from the net outflow of $0.9b in March quarter 2012.

Reserve assets recorded a net inflow of $2.8b, a turnaround of $7.5b from the net outflow of $4.7b in March quarter 2012.


INTERNATIONAL INVESTMENT POSITION


ANALYSIS

Australia's net international investment position at 30 June 2012 was a net foreign liability of $879.5b, down $5.2b on the 31 March 2012 position of $884.7b.

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

INTERNATIONAL INVESTMENT POSITION, Summary - June Quarter 2012

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

Position at beginning of period
884 672
143 396
741 276
Changes in position reflecting
Transactions
7 918
1 636
6 282
Price changes
-14 561
-22 718
8 157
Exchange rate changes
2 305
1 889
416
Other adjustments
-815
-866
52
Total changes
-5 153
-20 059
14 907
Position at end of period
879 520
123 336
756 183




SUPPLEMENTARY INFORMATION


CONDITIONS

The conditions in the global economy showed moderate increases for most countries in the June 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: China (1.8%), USA (0.4%), Germany (0.3%) and UK (-0.7%).

Australia's international investment activities during the quarter were as follows:
  • foreign asset transactions were $1.5b in June quarter 2012 compared to -$12.8b in March quarter 2012
  • foreign liability transactions were $6.4b in June quarter 2012 compared to $27.4b in March quarter 2012.

The Australian share market, as measured by the MSCI global index, decreased 6.1% in June quarter 2012 following an increase of 6.4% in March quarter 2012. There were decreases in all major markets: Europe ex UK 16.3%, Germany 14.1%, Japan 11.6%, France 10.7%, Canada 8.6%, Hong Kong 8.3%, USA 6.6%, Singapore 5.8%, New Zealand 5.8%, Switzerland 4.6% and United Kingdom 4.6%. A market price change of $15.3b was recorded for foreign equity assets and -$38.0b in foreign equity liabilities during June quarter 2012.

According to Bloomberg, the corporate benchmark composite yield decreased in Australia from 6.1% to 5.2%, in the UK from 4.5% to 4.3%, in USA from 3.5% to 3.4% and in Japan from 0.8% to 0.7%, while there was an increase in Germany from 3.2% to 3.3%. Long term government bond yields decreased in the major markets in June quarter 2012. The 10 year government bond yields decreased in the UK from 2.2% to 1.8%, in the USA from 2.2% to 1.7%, in Germany from 1.8% to 1.6% and in Japan from 1.0% to 0.8%. In Australia, the rate also decreased from 4.2% to 3.0%. This is reflected in the market price changes for both portfolio debt securities liabilities of $8.7b and assets of -$0.3b in June quarter 2012.

The Australian dollar appreciated against some of the major currencies and fell against others in June quarter 2012. It increased 8.7% against Swiss Franc, 8.2% against Swedish krona, 7.9% against Indian rupee, 3.9% against European euro, 3.5% against Danish kronor, 0.6% against New Zealand dollar and 0.3% against UK pound sterling. The Australian dollar fell 5.2% against Japanese yen, 2.1% against Hong Kong dollar, 2.0% against US dollar, 1.1% against Chinese renminbi and 1.0% against Singapore dollar. The Trade Weighted Index (TWI) recorded a decrease of 0.5%. The net impact of exchange rates was an increase of $5.2b on foreign assets and $7.5b on foreign liabilities.


RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 1)

In original terms, the IPD for total goods credits rose 2.1% and the chain Laspeyres price index for goods exports rose 1.6%. The export price index (EPI) rose 1.0% during the June quarter 2012.

In original terms, the IPD for total goods debits rose 1.3% and the chain Laspeyres price index for goods imports rose 2.3%. The import price index (IPI) rose 2.4% during the June 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 June quarter 2012, differences between the IPD and EPI were mainly due to the 'meat and meat preparations', 'other mineral fuels' and 'metals (excl. non-monetary gold)' components.

GOODS AND SERVICES, Price comparison - June Quarter 2012

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

Exports
Goods
1.7
2.1
1.0
1.6
Services
0.6
0.8
na
0.4
Imports
Goods
1.9
1.3
2.4
2.3
Services
3.1
3.1
na
3.1

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 2.1% between the March quarter 2012 and June quarter 2012 while the EPI for rural goods total decreased 0.9%.

The RBA Commodity Price Index for non-rural commodities increased 1.4% while the EPI for non-rural goods total (excluding non-monetary gold) increased 1.5%.

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.


FINANCIAL YEAR 2011-12 SITUATION

CURRENT ACCOUNT

In original terms, the balance on current account for 2011-12 was a deficit of $40.5b, an increase of $7.6b (23%) on the deficit of $32.9b recorded for 2010-11. The balance on goods and services surplus was $5.1b, a decrease of $16.1b (76%) on the surplus of $21.2b recorded in 2010-11. Goods credits increased $18.9b (8%) and goods debits increased $32.0b (15%).

The 2011-12 services deficit of $9.3b was an increase of $3.0b (48%) on the deficit of $6.3b in 2010-11.

The 2011-12 net primary income deficit decreased $8.8b (17%), with a decrease in primary income credits of $0.6b (2%) and a decrease in primary income debits of $9.4b (10%).

The 2011-12 secondary income deficit increased $0.3b (51%), with an increase in secondary income credits of $0.4b (7%) and an increase in secondary income debits of $0.8b (11%).


FINANCIAL ACCOUNT

The balance on financial account recorded a net inflow of $39.7b, with a net inflow on debt of $9.9b and a net inflow on equity of $29.8b. This result was up $5.9b on the net inflow of $33.8b recorded for the previous financial year as a result of:
  • an increase of $25.6b on the net inflow on direct investment
  • an increase of $15.8b on the net outflow on financial derivatives
  • an increase of $4.8b on the net outflow on other investment
  • an increase of $3.7b on the net inflow on portfolio investment
  • an increase of $2.7b on the net outflow on reserve assets.


INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position as at 30 June 2012 was a net foreign liability of $879.5b. This was an increase of $77.1b (10%) on the position a year earlier as a result of:
  • net transactions of $39.7b
  • exchange rate changes of $27.8b
  • price changes of $12.9
  • other adjustments of -$3.3b.

During 2012, Australia's net foreign equity liability increased to $123.3b, up $6.8b (6%) on the previous financial year, with net transactions of $29.8b partially offset by price changes of -$17.8b, other adjustments of -$4.8b and exchange rate changes of -$0.4b.

Australia's net foreign debt liability increased to $756.2b, up $70.3b (10%) on the previous financial year, with price changes of $30.7b, exchange rate changes of $28.2b, net transactions of $9.9b and other adjustments of $1.5b.

At 30 June 2012, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 31 March 2012 using current prices) was 60.8%. This compares with 57.4% one year ago and 48.0% one decade ago.

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.

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