5302.0 - Balance of Payments and International Investment Position, Australia, Sep 2016 Quality Declaration 
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ANALYSIS AND COMMENTS

BALANCE OF PAYMENTS

In original current price terms, the September quarter 2016 current account deficit was $14,638m, a rise of $2,172m (17%) on the June quarter 2016 deficit. In original current price terms, the balance on goods and services contributed $6,438m, primary income contributed $7,898m and secondary income contributed $302m to the deficit.

The capital and financial account surplus was $15,721m, with the capital account contributing a net deficit of $126m and the financial account contributing $15,847m to the surplus.

The contributors to the current account balances, in original terms at current prices, are shown in the following table.

BALANCE OF PAYMENTS, Summary(a): Original

Sep 2015
Dec 2015
Mar 2016
Jun 2016
Sep 2016
$m
$m
$m
$m
$m

CURRENT ACCOUNT
-23 637
-24 238
-14 236
-12 466
-14 638
Goods and services
-10 763
-13 285
-7 133
-5 646
-6 438
Credits
81 219
79 263
73 918
77 912
82 275
Debits
-91 982
-92 548
-81 051
-83 558
-88 713
Goods
-6 941
-10 104
-6 445
-3 909
-3 928
Credits
64 887
61 910
56 366
60 843
64 174
Debits
-71 828
-72 014
-62 811
-64 752
-68 102
Services
-3 822
-3 181
-688
-1 737
-2 510
Credits
16 332
17 353
17 552
17 069
18 101
Debits
-20 154
-20 534
-18 240
-18 806
-20 611
Primary income
-12 579
-10 707
-6 567
-6 408
-7 898
Credits
12 110
12 864
14 631
15 460
15 152
Debits
-24 689
-23 571
-21 199
-21 869
-23 049
Secondary income
-295
-246
-536
-412
-302
Credits
2 173
2 201
2 136
2 185
2 158
Debits
-2 468
-2 447
-2 672
-2 597
-2 460
CAPITAL AND FINANCIAL ACCOUNT
21 298
24 165
16 025
15 318
15 721
Capital account
-153
-167
-173
-174
-126
Acquisitions/disposals of non-produced non-financial assets
-
-
1
27
2
Credits
5
1
2
29
5
Debits
-5
-1
-1
-2
-3
Capital transfers
-153
-167
-174
-201
-128
Credits
-
-
-
-
-
Debits
-153
-167
-174
-201
-128
Financial account
21 451
24 332
16 198
15 492
15 847
Direct investment
5 131
28 091
13 062
15 674
9 741
Assets
-8 728
20 888
-1 441
-1 948
314
Liabilities
13 859
7 203
14 502
17 621
9 428
Portfolio investment
7 867
12 543
-25 376
-12 786
-9 393
Assets
-8 920
-9 761
-13 476
-9 305
-11 217
Liabilities
16 787
22 304
-11 901
-3 482
1 824
Financial derivatives
1 508
-5 322
-3 338
-4 934
-3 713
Assets
5 757
34 217
18 142
32 176
43 507
Liabilities
-4 249
-39 539
-21 480
-37 111
-47 219
Other investment
5 752
-11 928
30 073
19 062
18 447
Assets
-12 546
-28 134
27 156
-3 074
12 952
Liabilities
18 298
16 206
2 917
22 136
5 496
Reserve assets
1 192
948
1 777
-1 523
764
NET ERRORS AND OMISSIONS
2 339
73
-1 789
-2 851
-1 083

- nil or rounded to zero (including null cells)
(a) For sign conventions, see paragraphs 15-17 of the Explanatory Notes.


In seasonally adjusted current price terms, the September quarter 2016 current account deficit was $11,358m, a fall of $4,585m (29%) on the June quarter 2016 deficit.

In trend current price terms, the September quarter 2016 current account deficit was $11,959m, a fall of $2,660m (18%) on the June quarter 2016 deficit.

The contributors to the 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 - September Quarter 2016

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

Seasonally Adjusted

Balance on current account
-11 358
4 585
28.8
Balance on goods and services
-4 682
2 699
36.6
Net goods
-3 197
2 515
44.0
Net services
-1 485
183
11.0
Net primary income
-6 265
1 946
23.7
Net secondary income
-411
-59
-16.8

Trend

Balance on current account
-11 959
2 660
18.2
Balance on goods and services
-5 099
2 048
28.7
Net goods
-3 736
1 701
31.3
Net services
-1 364
346
20.2
Net primary income
-6 469
630
8.9
Net secondary income
-390
-17
-4.6




TERMS OF TRADE(footnote 1)

Australia's seasonally adjusted terms of trade on net goods and services for the September quarter 2016 rose 4.5% to 93.9, with an increase of 3.4% in the implicit price deflator (IPD) for goods and services credits and a decrease of 1.1% in the IPD for goods and services debits.

In trend terms, the terms of trade for net goods and services rose 2.6% to 92.6.

IMPLICIT PRICE DEFLATOR AND TERMS OF TRADE (a)
Graph: IMPLICIT PRICE DEFLATOR AND TERMS OF TRADE (a)



BALANCE ON GOODS AND SERVICES

In seasonally adjusted chain volume terms, the balance on goods and services was a surplus of $561m, a fall of $871m (61%) on the June quarter 2016 surplus of $1,432m.

The net surplus on goods fell $686m (31%) on the June quarter 2016 surplus of $2,182m. Goods credits fell $176m and goods debits rose $510m (1%). The net deficit on services rose $185m (25%) on the June quarter 2016 deficit of $750m.

The fall in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to detract 0.2 percentage points from growth in the September quarter 2016 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the June quarter 2016.

GOODS AND SERVICES, CHAIN VOLUME MEASURES (a)
Graph: GOODS AND SERVICES, CHAIN VOLUME MEASURES (a)



Goods

The trend estimate of net goods at current prices for the September quarter 2016 was a deficit of $3,736m, a fall of $1,701m (31%) on the June quarter 2016 deficit of $5,437m.

In seasonally adjusted terms at current prices, net goods was a deficit of $3,197m, a fall of $2,515m (44%) on the June quarter 2016 deficit of $5,712m.

GOODS, Price and volume analysis: Seasonally adjusted - September Quarter 2016

Change in:
Current prices
Current prices
Chain volume measures(a)
Implicit price deflators(a)(b)
$m
%
%
%

Exports
2 367
3.9
-0.3
4.2
Rural goods
340
3.3
1.0
2.4
Non-rural goods
1 410
3.1
-1.2
4.3
Net exports of goods under merchanting
17
13.7
11.0
2.5
Non-monetary gold
600
11.6
7.4
4.0
Imports
-148
-0.2
0.8
-1.0
Consumption goods
-874
-3.6
-3.3
-0.3
Capital goods
220
1.5
3.5
-2.0
Intermediate and other merchandise goods
94
0.4
1.7
-1.3
Non-monetary gold
412
28.0
22.9
4.1

(a) Reference year 2014-15.
(b) Movements in indexes are based on data to four decimal places.



GOODS CREDITS

The trend estimate of goods credits at current prices rose $1,441m (2%) to $61,978m in the September quarter 2016.

In seasonally adjusted terms at current prices, goods credits rose $2,367m (4%) to $62,973m, with prices up 4%.


Rural Goods

Exports of rural goods, in seasonally adjusted terms at current prices, rose $340m (3%) to $10,523m, with volumes up 1% and prices up 2%.

The main components contributing to the rise were:
  • other rural, up $318m (7%), with volumes up 4% and prices up 2%
  • cereal grains and cereal preparations, up $287m (16%), with volumes up 23% and prices down 5%.

Partly offsetting these rises was meat and meat preparations, down $274m (9%), with volumes down 19% and prices up 11%.


Non-rural Goods

Exports of non–rural goods, in seasonally adjusted terms at current prices, rose $1,410m (3%) to $46,546m, with volumes down 1% and prices up 4%.

The main components contributing to the rise were:
  • coal, coke and briquettes, up $617m (7%), with volumes up 3% and prices up 5%
  • metal ores and minerals, up $584m (3%), with volumes down 2% and prices up 6%
  • other mineral fuels, up $360m (7%), with volumes down 1% and prices up 8%.

Partly offsetting these rises were:
  • machinery, down $79m (3%), with volumes down 4% and prices up 1%
  • transport equipment, down $72m (6%), with volumes down 3% 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, rose $17m (14%), with volumes up 11% and prices up 3%.


Non-monetary Gold

Non-monetary gold, in original and seasonally adjusted terms at current prices, rose $600m (12%), with volumes up 7% and prices up 4%.


GOODS DEBITS

The trend estimate of goods debits at current prices fell $260m to $65,714m in the September quarter 2016.

In seasonally adjusted terms at current prices, goods debits fell $148m to $66,170m, with volumes up 1% and prices down 1%.


Consumption Goods

Imports of consumption goods, in seasonally adjusted terms at current prices, fell $874m (4%) to $23,404m, with volumes down 3%.

The main components contributing to the fall were:
  • consumption goods n.e.s., down $614m (8%), with volumes down 9% and prices up 1%
  • textiles, clothing and footwear, down $134m (3%), with volumes down 3% and prices down 1%
  • non-industrial transport equipment, down $131m (2%), with volumes down 2%.


Capital Goods

Imports of capital goods, in seasonally adjusted terms at current prices, rose $220m (1%) to $15,373m, with volumes up 3% and prices down 2%.

The main components contributing to the rise were:
  • civil aircraft and confidentialised items, up $270m (67%), with volumes up 69% and prices down 1%
  • telecommunications equipment, up $119m (4%), with volumes up 9% and prices down 4%.

Partly offsetting these rises was machinery and industrial equipment, down $192m (4%), with volumes down 3% and prices down 1%.


Intermediate and Other Merchandise Goods

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $94m to $25,509m, with volumes up 2% and prices down 1%.

The main components contributing to the rise were:
  • fuels and lubricants, up $253m (4%), with volumes up 5% and prices down 1%
  • processed industrial supplies n.e.s., up $142m (2%), with volumes up 3% and prices down 1%.

Partly offsetting these rises were:
  • parts for transport equipment, down $118m (4%), with volumes down 5% and prices up 1%
  • other parts for capital goods, down $107m (3%), with volumes down 2% and prices down 1%
  • other merchandise goods, down $67m (29%), with volumes down 29% and prices down 1%.


Non-monetary Gold

Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, rose $412m (28%), with volumes up 23% and prices up 4%.


SERVICES

The trend estimate of net services at current prices was a deficit of $1,364m, a fall of $346m (20%) on the June quarter 2016 deficit of $1,710m.

In seasonally adjusted terms at current prices, net services was a deficit of $1,485m, a fall of $183m (11%) on the June quarter 2016 deficit of $1,668m.

SERVICES, Price and volume analysis: Seasonally adjusted - September Quarter 2016

Change in:
Current prices
Current prices
Chain volume measures(a)
Implicit price deflators(a)(b)
$m
%
%
%

Exports
492
2.8
2.4
0.4
Manufacturing services on physical inputs owned by others
5
166.7
167.4
-0.3
Maintenance and repair services n.i.e.
17
113.3
114.0
-0.3
Transport
-46
-2.6
-2.8
0.2
Travel
378
3.5
2.9
0.6
Other services
138
2.6
2.7
-0.1
Imports
310
1.6
3.3
-1.7
Manufacturing services on physical inputs owned by others
-
-
-
-
Maintenance and repair services n.i.e.
12
6.7
9.5
-2.6
Transport
-76
-1.9
-3.1
1.2
Travel
219
2.6
4.9
-2.2
Other services
155
2.3
5.4
-2.9

- nil or rounded to zero (including null cells)
(a) Reference year 2014-15.
(b) Movements in indexes are based on data to four decimal places.



Services Credits

Services credits, in seasonally adjusted terms at current prices, rose $492m (3%) to $18,167m, with volumes up 2%.

The main components contributing to the rise were:
  • travel, up $378m (4%), with volumes up 3% and prices up 1%
  • other services, up $138m (3%), with volumes up 3%.

Partly offsetting these rises was transport, down $46m (3%), with volumes down 3%.

In seasonally adjusted terms, tourism related services credits rose $379m (3%) to $11,745m.


Services Debits

Services debits, in seasonally adjusted terms at current prices, rose $310m (2%) to $19,653m, with volumes up 3% and prices down 2%.

The main components contributing to the rise were:
  • travel, up $219m (3%), with volumes up 5% and prices down 2%
  • other services, up $155m (2%), with volumes up 5% and prices down 3%.

Partly offsetting these rises was transport, down $76m (2%), with volumes down 3% and prices up 1%.

In seasonally adjusted terms, tourism related services debits rose $223m (2%) to $10,206m.


PRIMARY INCOME

The trend estimate of the net primary income deficit at current prices fell $630m (9%) to $6,469m in the September quarter 2016.

In seasonally adjusted terms at current prices, the net primary income deficit fell $1,946m (24%) to $6,265m in the September quarter 2016.

NET PRIMARY INCOME
Graph: NET PRIMARY INCOME



Primary Income Credits

Primary income credits, in seasonally adjusted terms at current prices, rose $315m (2%) to $15,369m. The main component contributing to the rise was direct investment assets, income on equity and investment fund shares, up $356m (5%).


Primary Income Debits

Primary income debits, in seasonally adjusted terms at current prices, fell $1,630m (7%) to $21,634m. The main component contributing to the fall was portfolio investment liabilities, investment income on equity and investment fund shares, down $703m (14%).


SECONDARY INCOME

The trend estimate of the net secondary income deficit at current prices rose $17m (5%) to $390m in the September quarter 2016.

In seasonally adjusted terms at current prices, the net secondary income deficit rose $59m (17%) to $411m in the September quarter 2016.


CAPITAL ACCOUNT

In original terms, the capital account deficit was $126m, a decrease of $48m (28%) on the June quarter 2016 deficit of $174m. Capital account credits decreased $24m (83%) and capital account debits decreased $72m (35%) in the September quarter 2016.


FINANCIAL ACCOUNT

The balance on the financial account, in original terms, recorded a net inflow of $15.8b, which was driven by a net inflow of equity of $10.4b and a net inflow of debt of $5.5b.

The financial account surplus increased $0.4b (2%) from $15.5b to $15.8b in the September quarter 2016.


Direct Investment

Direct investment recorded a net inflow of $9.7b in the September quarter 2016, a decrease of $5.9b on the net inflow of $15.7b in the June quarter 2016, where:
  • direct investment liabilities recorded an inflow of $9.4b, a decrease of $8.2b on the inflow of $17.6b in the June quarter 2016
  • direct investment assets recorded an inflow of $0.3b, a turnaround of $2.3b on the outflow of $1.9b in the June quarter 2016.


Portfolio Investment

Portfolio investment recorded a net outflow of $9.4b in the September quarter 2016, a decrease of $3.4b on the net outflow of $12.8b in the June quarter 2016, where:
  • equity investment fund shares recorded a net outflow of $0.2b in the September quarter 2016, a decrease of $3.8b on the net outflow of $4.0b in the June quarter 2016
  • debt securities recorded a net outflow of $9.2b in the September quarter 2016, an increase of $0.4b on the net outflow of $8.8b in the June quarter 2016.


Financial Derivatives

Financial derivatives recorded a net outflow of $3.7b in the September quarter 2016, a decrease of $1.2b on the net outflow of $4.9b in the June quarter 2016.


Other Investment

Other investment recorded a net inflow of $18.4b in the September quarter 2016, a decrease of $0.6b on the net inflow of $19.1b in the June quarter 2016. This was driven by net inflows in currency and deposits of $19.0b and in loans of $0.6b.


Reserve Assets

Reserve assets recorded an inflow of $0.8b in the September quarter 2016, a turnaround of $2.3b on the outflow of $1.5b in the June quarter 2016.


INTERNATIONAL INVESTMENT POSITION (IIP)

Australia's net IIP liability position was $1,043.3b at 30 September 2016, an increase of $5.4b (1%) on the revised 30 June 2016 position of $1,037.9b. Australia's net foreign debt liability increased $0.8b to $1,048.5b. Australia's net foreign equity asset decreased $4.6b (47%) to $5.2b at 30 September 2016.

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

INTERNATIONAL INVESTMENT POSITION, By Net Foreign Equity and Net Foreign Debt

Changes in position reflecting
Position at beginning of period
Transactions
Price changes
Exchange rate changes
Other adjustments
Position at end of period
$m
$m
$m
$m
$m
$m

Net International Investment Position
Mar 2016
959 864
16 198
1 748
33 009
-2 991
1 007 829
Jun 2016
1 007 829
15 492
26 707
-11 096
-1 034
1 037 897
Sep 2016
1 037 897
15 847
-24 249
16 368
-2 584
1 043 279
Net Foreign Equity
Mar 2016
-58 303
3 683
-2 012
47 032
-4 619
-14 219
Jun 2016
-14 219
3 337
16 082
-13 757
-1 249
-9 806
Sep 2016
-9 806
10 390
-26 921
27 528
-6 433
-5 242
Net Foreign Debt
Mar 2016
1 018 167
12 515
3 760
-14 023
1 628
1 022 048
Jun 2016
1 022 048
12 154
10 625
2 661
215
1 047 703
Sep 2016
1 047 703
5 457
2 672
-11 160
3 849
1 048 521



SUPPLEMENTARY INFORMATION

CONDITIONS

The conditions in the global economy showed modest growth in Australia’s major trading partner countries in the September quarter 2016. According to the Organisation for Economic Cooperation and Development (OECD)(footnote 2), preliminary growth rates compared to last quarter in seasonally adjusted terms showed quarterly growth for China (1.8%), Indonesia (1.2%), South Korea (0.7%), USA (0.7%), UK (0.5%), Euro 28 (0.4%) and Germany (0.2%).
  • foreign asset transactions were $46.3b in the September quarter 2016 compared to $16.3b in the June quarter 2016
  • foreign liability transactions were -$30.5b in the September quarter 2016 compared to -$0.8b in the June quarter 2016.

The Australian share market, as measured by the MSCI global index(footnote 3), increased 3.8% in September quarter 2016, following an increase of 2.8% in June quarter 2016. Increases were recorded in Hong Kong (11.0%), Germany (8.7%), New Zealand (7.7%), Japan (6.4%), UK (6.0%), Europe ex. UK (5.8%), Canada (5.5%), France (5.0%), the USA (3.5%) and Switzerland (1.9%). A decrease was recorded in Singapore (0.6%). A market price change of -$41.7b was recorded for foreign equity assets and $14.8b in foreign equity liabilities in the September quarter 2016.

According to Bloomberg(footnote 4), the composite corporate benchmark yield decreased in the USA from 2.92% to 2.87%, the UK from 2.55% to 1.99%, Germany from 0.93% to 0.70% and Australia from 3.16% to 2.93%. In Japan, the rate increased from 0.13% to 0.18%. The long-term 10 year government bond yields increased in the USA from 1.50% to 1.60% and Japan from -0.23% to -0.08%. The decreases were in the UK from 0.87% to 0.75% and Germany from -0.13% to -0.19%. In Australia, the rate decreased from 2.12% to 1.99%. A market price change of -$0.6b was recorded for portfolio debt securities assets and $1.3b in portfolio debt securities liabilities in the September quarter 2016.

The Australian dollar appreciated against the majority of the major currencies in the September quarter 2016. The Australian dollar appreciated 6.07% against the UK pound sterling, 4.17% against the Canadian dollar, 3.14% against the Chinese renminbi, 2.75% against the US dollar, 1.54% against the European euro, 1.30% against the Indonesian rupiah, 1.28% against the Indian rupee and 1.18% against the Japanese yen. It depreciated 4.15% against the South African rand, 2.04% against the South Korean won and 0.05% against the New Zealand dollar. The Trade-weighted Index (TWI)(footnote 4,footnote 5) recorded a rise of 2.24%. This was reflected in exchange rate changes for foreign assets of $36.7b and foreign liabilities of -$20.4b in the September quarter 2016.


RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6)

In original terms, the IPD for total goods credits rose 3.2% and the chain Laspeyres price index for goods exports rose 3.6%. The Export Price Index (EPI)(footnote 7) rose 3.5% during the September quarter 2016.

In original terms, the IPD for total goods debits fell 0.7% and the chain Laspeyres price index for goods imports fell 0.8%. The Import Price Index (IPI)(footnote 7) fell 1.0% during the September quarter 2016.

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.

GOODS AND SERVICES, Price comparison - September Quarter 2016

Change in:
Seasonally adjusted
Original
Implicit price deflators(a)
Implicit price deflators(a)
International trade price indexes(b)
Chain Laspeyres price indexes(a)
%
%
%
%

Exports
Goods
4.2
3.2
3.5
3.6
Services
0.4
0.4
na
0.3
Imports
Goods
-1.0
-0.7
-1.0
-0.8
Services
-1.7
-1.7
na
-1.8

na not available
(a) Reference year 2014-15 = 100.
(b) 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 (average monthly index) for rural commodities decreased 0.2% between the June quarter 2016 and the September quarter 2016 while the EPI for rural goods increased 2.2%.

The RBA Commodity Price Index for non-rural commodities increased 3.4% while the EPI for non-rural goods total (excluding non-monetary gold) increased 3.9%.

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.


FOOTNOTES

1 In this commentary movements in indexes are based on data to four decimal places. <back
2 OECD Statistics Quarterly National Account, Organisation for Economic Cooperation and Development – Economic Department, viewed 16 November 2016. <back
3 MSCI Global Market Indexes 2016, Morgan Stanley Capital International, viewed 4 October 2016. <back
4 Bloomberg, Bloomberg Professional Service, viewed 6 October 2016. <back
5 Exchange Rates – Daily 2014 to Current, Reserve Bank of Australia - Statistical Tables, viewed 5 October 2016. <back
6 In this commentary movements in indexes are based on data to four decimal places. <back
7 Source: International Trade Price Indexes, Australia (cat. no. 6457.0). <back