5302.0 - Balance of Payments and International Investment Position, Australia, Mar 2008  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 03/06/2008   
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

The trend estimate of the balance on current account for the March quarter 2008 was a deficit of $19,450m. This was an increase of $1,220m (7%) on the deficit recorded for the December quarter 2007 where:

  • the goods and services deficit rose $1,266m (20%) to $7,717m
  • the income deficit fell $46m to $11,667m
  • the current transfers deficit of $66m remained unchanged from the previous quarter.

In seasonally adjusted terms, the current account deficit rose $776m (4%) to $19,492m between the December quarter 2007 and March quarter 2008 where:
  • the goods and services deficit rose $1,459m (22%) to $8,019m
  • the income deficit fell $677m (6%) to $11,400m
  • the current transfers deficit fell $7m (9%) to $73m.


Goods and Services

The trend estimate of the balance on goods and services at current prices was a deficit of $7,717m, an increase of $1,266m (20%) on the December quarter 2007 deficit.

In seasonally adjusted terms, the balance on goods and services was a deficit of $8,019m, an increase of $1,459m (22%) on the December quarter 2007 deficit where:
  • the net goods deficit rose $1,238m (18%) to $8,258m
  • the net services surplus fell $221m (48%) to $239m.

The increase in the goods deficit resulted from the increase in goods debits (imports), up $3,610m (7%) outweighing the increase in goods credits (exports), up $2,372m (6%).

Contributing to the increase in goods debits were:
  • intermediate and other merchandise goods, up $1,585m (7%)
  • capital goods, up $930m (8%)
  • consumption goods, up $651m (4%)
  • other goods, up $445m (22%).

Contributing to the increase in goods credits were:
  • non-rural goods, up $1,319m (4%)
  • rural goods, up $610m (10%)
  • other goods, up $443m (13%).

The decrease in the services surplus resulted from higher services debits, up $155m (1%) and lower services credits, down $66m (1%).

In seasonally adjusted volume terms, the deficit on goods and services was $12,872m, an increase of $1,919m (18%) on the $10,953m deficit recorded in the December quarter 2007. The net deficit on goods rose $1,764m (17%) to $11,971m. Goods credits rose $378m (1%) and goods debits rose $2,142m (4%). The net services balance was a deficit of $902m, an increase of $157m (21%) on the deficit of $745m in December quarter 2007.

The increase of $1,919m in the deficit on goods and services in volume terms could be expected to detract -0.7 percentage points from growth in the March quarter 2008 volume measures of GDP, assuming no significant revision to the GDP chain volume estimate for the December quarter 2007.

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



Goods Credits

The trend estimate of goods credits rose $825m (2%) to $43,809m in the March quarter 2008.

In seasonally adjusted terms at current prices, goods credits rose $2,372m (6%) to $44,655m.

Exports of rural goods, in seasonally adjusted terms at current prices, rose $610m (10%) to $6,592m, with volumes up 1% and prices up 9%. The increases were in:
  • cereal grains and cereal preparations, up $532m (65%), with volumes up 39% and prices up 18%
  • other rural, up $198m (7%), with volumes up 1% and prices up 6%.

Partly offsetting these increases was the meat and meat preparations component, down $89m (5%), with volumes down 9% and prices up 4%.

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $1,319m (4%) to $34,203m, with volumes up 1% and prices up 3%. The largest increases were in:
  • metal ores and minerals, up $995m (11%), with volumes up 7% and prices up 4%
  • other mineral fuels, up $307m (7%), with volumes up 2% and prices up 5%
  • transport equipment, up $95m (7%), with volumes up 8% and prices down 1%.

Partly offsetting these increases was a fall in the metals (excluding non-monetary gold) component, down $191m (5%), with volumes up 1% and prices down 7%.

Exports of other goods, in seasonally adjusted terms at current prices, rose $443m (13%) to $3,860m. The main contributor to this increase was the non-monetary gold component, up $438m (15%), with volumes up 1% and prices up 14%.

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



Goods Debits

The trend estimate of goods debits rose $1,980m (4%) to $51,848m in the March quarter 2008.

In seasonally adjusted current price terms, goods debits rose $3,610m (7%) to $52,912m.

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $651m (4%) to $15,373m, with volumes up 3% and prices up 1%. The largest increases were in:
  • non-industrial transport equipment, up $252m (6%), with volumes up 4% and prices up 2%
  • consumption goods, n.e.s., up $213m (5%), with volumes up 6% and prices down 1%
  • food and beverages, mainly for consumption, up $119m (6%), with volumes up 1% and prices up 5%.

Imports of capital goods, in seasonally adjusted terms at current prices, rose $930m (8%) to $11,883m, with volumes up 8%. The largest increases were in:
  • machinery and industrial equipment, up $523m (14%), with volumes up 15% and prices down 1%
  • civil aircraft, up $444m (91%) on volumes
  • industrial transport equipment, n.e.s., up $94m (5%), with volumes up 6% and prices down 1%.

Partly offsetting these increases were falls in:
  • telecommunications equipment, down $122m (8%), with volumes down 9% and prices up 1%
  • ADP equipment, down $47m (3%), with prices down 2%.

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $1,585m (7%) to $23,148m, with volumes up 2% and prices up 5%. The largest increases were in:
  • fuels and lubricants, up $1,060m (15%), with volumes up 5% and prices up 10%
  • organic and inorganic chemicals, up $162m (16%), with volumes up 14% and prices up 2%
  • processed industrial supplies, n.e.s., up $141m (3%), with volumes down 2% and prices up 5%
  • other merchandise goods, up $121m (35%), with volumes up 32% and prices up 3%.

Partly offsetting these increases were falls in:
  • plastics, down $34m (4%), with volumes down 5% and prices up 1%
  • primary industrial supplies, n.e.s., down $29m (8%), with volumes down 15% and prices up 8%.

Imports of other goods, in seasonally adjusted terms at current prices, rose $445m (22%) to $2,509m. The main component contributing to the rise was non-monetary gold, up $429m (27%), with volumes up 9% and prices up 16%, partly offset by goods procured in ports by carriers, down $20m (5%), with volumes down 10% and prices up 6%.

General Merchandise Debits(a)
Graph: General Merchandise Debits(a)



Services

The trend estimate of net services at current prices was a surplus of $322m, a decrease of $110m (25%) on the December quarter 2007 surplus of $432m.

In seasonally adjusted terms at current prices, net services recorded a surplus of $239m, a decrease of $221m (48%) on the December quarter 2007 surplus of $460m.

Services credits, in seasonally adjusted terms at current prices, fell $66m (1%) to $12,258m, with volumes down 1%. The component contributing to the fall was travel services, down $193m (3%), with volumes down 4% and prices up 1%. This fall was partly offset by the other services component, up $102m (3%) on volumes.

Services debits, in seasonally adjusted terms at current prices, rose $155m (1%) to $12,019m, with prices up 1%. All components contributed to the rise with:
  • transportation services, up $110m (3%), with volumes down 1% and prices up 4%
  • other services, up $43m (1%), with volumes up 2% and prices down 1%.

Seasonally adjusted, tourism related services credits fell $101m (1%) to $7,796m, and tourism related services debits rose $29m to $6,277m.


IMPLICIT PRICE DEFLATOR

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits rose 3.7%. In original terms, it rose 4.1%. The chain Laspeyres price index for goods and services credits rose 3.3%. In original terms, the IPD for goods credits rose 5.1% and the IPD for services credits rose 0.5%.

The total goods and services debits IPD rose 2.6% in seasonally adjusted terms. In original terms, it rose by 3.3% and the chain Laspeyres price index for goods and services debits rose 2.6%. In original terms, the IPD for goods debits rose 3.8% and the IPD for services debits rose 1.0%.

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 5.1% while the chain Laspeyres price index for goods exports rose 4.2%. The export price index (EPI) rose 3.5% during the March quarter 2008.

In original terms, the implicit price deflator for total goods debits rose 3.8% while the chain Laspeyres price index for goods imports rose 2.9%. The import price index (IPI) rose 2.7% during the March quarter 2008.


Terms of trade

Australia's seasonally adjusted terms of trade rose 1.1% to 109.2, with an increase of 3.7% in the IPD for goods and services credits and an increase of 2.6% in the goods and services debits IPD. The trend estimate of the terms of trade increased 1.0% to 109.0.


Income

The trend estimate of the net income deficit decreased $46m to $11,667m.

In seasonally adjusted terms the net income deficit fell $677m (6%) to $11,400m. Income credits rose $113m (1%) to $8,306m and income debits fell $564m (3%) to $19,706m. The main component contributing to the rise in income credits was a $212m (26%) rise in portfolio investment income on equity. The main driver to the decrease in income debits was a $709m (11%) decrease in portfolio investment income on debt (refer to Changes in Forthcoming Issues on page 2).

In original terms the net income deficit fell $638m (5%) to $11,298m. Income credits increased $389m (5%) to $8,335m. Income debits decreased $249m (1%) to $19,633m.

Net Income
Graph: Net Income



Current Transfers

In seasonally adjusted terms, the net current transfers deficit was $73m, a decrease of $7m (9%) on the $80m deficit recorded in the December quarter 2007. Current transfer credits rose $4m and current transfer debits fell $2m.


CAPITAL AND FINANCIAL ACCOUNT

Capital Account

In original terms, the capital account surplus was $632m, up $150m (31%) on the revised December quarter 2007 surplus. Capital transfer credits rose $186m (24%) to $970m and capital transfer debits rose $36m (12%) to $338m.


Financial Account

The level of transactions in foreign assets and liabilities during March quarter 2008 were closer to historical levels. This followed two quarters of contraction in the immediate aftermath of events in global credit markets.

The main influence on the financial account during the March quarter 2008 was an increase in issuance of debt securities by Australian resident depository corporations. Net issues of bonds and notes by depository corporations were up $21.8b on the December quarter 2007 to $27.5b, which is the highest value recorded for this series. Money market instruments for depository corporations turned around by $42.8b on the December quarter 2007 to $24.6b, which again is the highest value recorded for this series.

The balance on financial account recorded a net inflow of $18.2b, with a $24.2b inflow of debt partly offset by a $6.1b outflow of equity.

Direct investment in Australia recorded an inflow of $12.9b in the March quarter 2008, a turnaround of $21.3b on the revised December quarter 2007 outflow of $8.4b. Australia's direct investment abroad recorded an outflow of $9.1b, a turnaround of $13.8b on the previous quarter's revised inflow of $4.7b. In net terms, direct investment recorded an inflow of $3.8b, a turnaround of $7.6b on the December quarter 2007 outflow of $3.7b.

Portfolio investment recorded a net inflow of $33.4b, a turnaround of $50.9b on the net outflow of $17.4b in the December quarter 2007.

Other investment recorded a net outflow of $14.4b, a turnaround of $44.3b on the net inflow of $30.0b in the previous quarter.

Reserve assets recorded a net outflow of $5.4b, a turnaround of $29.0b on the previous quarter's net inflow of $23.6b.


INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position at 31 March 2008 was a net foreign liability of $729.5b, up $6.2b (1%) on 31 December 2007. The increase consisted of:
  • net transactions of $18.2b
  • exchange rate changes of $6.3b
  • price changes of -$18.3b.

During the March quarter 2008 the level of net foreign debt rose $9.0b (1%) to $616.1b. Increases due to transactions of $24.2b were partially offset by decreases due to price changes of -$9.0b, exchange rate changes of -$5.7b and other changes of -$0.6b.

During the March quarter 2008 the level of net foreign equity fell $2.8b (2%) to close at a liability of $113.4b. Decreases due to price changes of -$9.3b and net transactions of -$6.1b were partially offset by increases due to exchange rate changes of $11.9b and other changes of $0.7b.

The large price changes for both foreign equity assets and foreign equity liabilities were the result of continued broad based falls in both the Australian and overseas equity markets.