5302.0 - Balance of Payments and International Investment Position, Australia, Dec 2010 
Quality Declaration
Quality Declaration ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 01/03/2011
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ANALYSIS AND COMMENTS
VOLUMES AND PRICES Goods and Services In seasonally adjusted chain volume terms, the balance on goods and services was a deficit of $472m, an increase of $24m on the September quarter 2010 deficit of $448m. The net surplus on goods increased $697m (22%). Goods credits increased $2,444m (4%) and goods debits increased $1,747m (3%). The net deficit on services increased $722m (20%) on the September quarter 2010 deficit of $3,675m. The increase in the balance on goods and services deficit, in seasonally adjusted chain volume terms, is expected to make no contribution to growth in the December quarter 2010 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the September quarter 2010. Terms of Trade and Implicit Price Deflator Australia's seasonally adjusted terms of trade rose 1.1% to 110.7 with a decrease of 3.4% in the implicit price deflator (IPD) for goods and services credits and a decrease of 4.5% in the IPD for goods and services debits. The trend estimate of the terms of trade for net goods and services increased 1.5% to 111.0. Goods The trend estimate of net goods at current prices was a surplus of $7,952m, an increase of $699m (10%) on the September quarter 2010 surplus of $7,253m. In seasonally adjusted terms at current prices, net goods recorded a surplus of $7,721m, an increase of $534m (7%) on the September quarter 2010 surplus of $7,187m.
Services
GOODS CREDITS The trend estimate of goods credits at current prices rose $733m (1%) to $61,274m in the December quarter 2010. In seasonally adjusted terms at current prices, goods credits fell $228m to $60,544m. Rural Goods Exports of rural goods, in seasonally adjusted terms at current prices, fell $16m to $7,139m, with volumes down 3% and prices up 2%. The components with the most significant movements were:
Non-rural Goods Exports of non-rural goods, in seasonally adjusted terms at current prices, fell $792m (2%) to $49,521m, with volumes up 4% and prices down 6%. The main components contributing to the decrease were:
Partly offsetting these decreases was the metal ores and minerals component, up $990m (5%), with volumes up 17% and prices down 10%. Net Exports of Goods Under Merchanting Net exports of goods under merchanting, in seasonally adjusted terms at current prices, fell $88m to -$11m with prices down 1%. Non-monetary Gold Exports of non-monetary gold, in seasonally adjusted terms at current prices, rose $667m (21%) to $3,894m, with volumes up 18% and prices up 3%. GOODS DEBITS The trend estimate of goods debits at current prices rose $34m to $53,322m in the December quarter 2010. In seasonally adjusted terms at current prices, goods debits fell $762m (1%) to $52,823m. Consumption Goods Imports of consumption goods, in seasonally adjusted terms at current prices, fell $349m (2%) to $16,119m, with volumes up 2% and prices down 4%. The main components contributing to the decrease were:
Capital Goods Imports of capital goods, in seasonally adjusted terms at current prices, fell $24m to $11,901m with volumes up 6% and prices down 6%. The main components contributing to the decrease were:
Largely offsetting these decreases was the civil aircraft and other confidentialised items component, up $436m (44%) with volumes up 56% and prices down 8%. Intermediate and Other Merchandise Goods Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, fell $775m (3%) to $23,226m, with volumes up 1% and prices down 4%. The main components contributing to the decrease were:
Largely offsetting these decreases was the fuels and lubricants component, up $608m (9%) with volumes up 10% and prices down 1%. Non-monetary Gold Imports of non-monetary gold, in seasonally adjusted terms at current prices, rose $385m (32%) to $1,577m, with volumes up 30% and prices up 2%. SERVICES The trend estimate of net services at current prices was a deficit of $1,104m, an increase of $174m (19%) on the September quarter 2010 deficit of $930m. In seasonally adjusted terms at current prices, net services recorded a deficit of $965m, a decrease of $192m (17%). Services Credits Services credits, in seasonally adjusted terms at current prices, fell $129m (1%) to $13,217m with volumes down 1%. The main component contributing to the decrease was:
Partly offsetting this decrease was the other services component, up $77m (2%) with volumes up 2%. In seasonally adjusted terms tourism related service credits fell $216m (2%) to $8,766m. Services Debits Services debits, in seasonally adjusted terms at current prices, fell $322m (2%) to $14,181m, with volumes up 4% and prices down 6%. The main component contributing to the decrease was:
In seasonally adjusted terms tourism related service debits fell $74m (1%) to $7,766m. PRIMARY INCOME The trend estimate of the net primary income deficit at current prices increased $512m (4%) in the December quarter 2010 to $12,706m. In seasonally adjusted terms, the net primary income deficit increased $1,545m (13%) in the December quarter 2010 to $13,713m. In original terms, the primary income deficit decreased $69m (1%) to $13,347m in the December quarter 2010. Primary income credits increased $74m (1%) to $10,873m and primary income debits increased $5m to $24,220m. Primary Income Credits Primary income credits, in seasonally adjusted terms at current prices, increased $57m (1%) to $11,001m. The main contributors to the increase were:
The above increases were partly offset by:
Primary Income Debits Primary income debits, in seasonally adjusted terms at current prices, increased $1,601m (7%) to $24,713m. The main contributors to the increase were:
SECONDARY INCOME The trend estimate of the net secondary income deficit at current prices, decreased $30m (8%) in the December quarter 2010 to $343m. In seasonally adjusted terms the net secondary income deficit decreased $8m (2%) in the December quarter 2010 to $343m. FINANCIAL ACCOUNT The balance on financial account, in original terms, recorded a net inflow of $8.6b, with a net inflow of $10.5b of equity and a net outflow of $1.9b of debt. The financial account surplus increased $0.5b from $8.1b in September quarter 2010 to $8.6b in December 2010, in line with the increase in the current account deficit which rose $0.6b from $8.1b last quarter to $8.7b this quarter. Direct investment recorded a net inflow of $6.5b in December quarter 2010, a turnaround of $13.7b from the net outflow of $7.2b in September quarter 2010, where:
Portfolio investment recorded a net inflow of $17.6b, an increase of $0.8b on the net inflow of $16.9b in September quarter 2010. This was driven by:
Financial derivatives recorded a net outflow of $5.7b, a turnaround of $12.1b from the net inflow of $6.5b in the September quarter 2010. The main contributor was deposit-taking corporations, except the central bank, with a net outflow $7.0b. Other investment recorded a net outflow of $8.7b, an increase of $2.9b from the net outflow of $5.8b in the September quarter 2010. Reserve assets recorded a net outflow of $1.1b, a decrease of $1.1b from the net outflow of $2.2b in the September quarter 2010. INTERNATIONAL INVESTMENT POSITION ANALYSIS Australia's net international investment position at 31 December 2010 was a net foreign liability of $782.1b, down $5.7b (1%) on the 30 September 2010 position of $787.8b. The changes contributing to this result are shown in the following table.
SUPPLEMENTARY INFORMATION CONDITIONS The conditions in the global economy continued to improve for most countries in the December quarter 2010. According to the Organisation for Economic Cooperation and Development (OECD), preliminary real GDP estimates in seasonally adjusted terms showed positive quarterly growth for: USA (0.8%), Korea (0.5%), Germany (0.4%), Italy (0.1%) and total EU (0.2%). Decreases were recorded in the UK (-0.5%) and Japan (-0.3%). Net foreign asset and liability transactions were -$12.6b and $21.2b in the December quarter 2010, compared to -$16.4b and $24.6b respectively in the September quarter 2010. The Australian share market, as measured by the MSCI global index, increased 2.9% in December quarter 2010, a decrease on the 6.4% increase in September quarter 2010. There were increases in all major markets: Germany 11.4%, USA 10.5%, Japan 8.8%, Canada 8.0%, UK 6.1%, Hong Kong 4.4%, Europe ex. UK 3.5%, Singapore 3.4%, France 3.1% and Switzerland 2.6%. The world index increased 8.6%. This is reflected in the price changes of -$29.7b in foreign assets and $13.9b in foreign liabilities during December quarter 2010. According to Reuters, the composite corporate benchmark yield increased in the USA (4.62% to 5.45%), Germany (3.21% to 3.87%) and Japan (1.07% to 1.38%) while the yield decreased in the UK (5.50% to 4.57%). Long term government bond yields increased in all major markets over December quarter 2010. The 10 year government bond yields increased from 2.53% to 3.30% in the US, 2.95% to 3.40% in the UK, 2.26% to 2.89% in Germany, 0.93% to 1.12% in Japan and 5.00% to 5.56% in Australia. This is reflected in the market price changes for both portfolio debt securities liabilities (-$12.1b) and assets ($3.2b) in the December quarter 2010. The AUD appreciated against most of the major currencies in the December quarter 2010. It increased against the UK pound sterling (8.0%), Euro (7.4%), the Hong Kong dollar (5.4%), USD (5.1%), the Chinese Renminbi (3.6%), Japanese yen (2.8%), the Canadian dollar (1.8%) and the New Zealand dollar (0.3%). The Trade Weighted Index (TWI) recorded an increase of 4.0%. The net impact of exchange rate changes was a decrease of $25.4b and $22.6b respectively on Australia's net foreign assets and foreign liabilities position. RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 1) In original terms, the IPD for total goods credits fell 4.3% and the chain Laspeyres price index for goods exports fell 4.5%. The export price index (EPI) fell 8.1% during the December quarter 2010. The EPI and IPD for the coal and cereal grains and cereal preparations components varied due to a number of factors including differences in pricing points, timing, coverage and weights. In original terms, the IPD for total goods debits fell 4.3% and the chain Laspeyres price index for goods imports fell 3.8%. The import price index (IPI) fell 3.8% during the December quarter 2010.
Commodity Price Indexes The RBA Commodity Price Index (average monthly index) for rural commodities increased 8.7% between the September and December quarters 2010 while the EPI for rural goods total increased 1.6%. The RBA Commodity Price Index for non-rural commodities decreased 5.4% while the EPI for non-rural goods total (excluding non-monetary gold) decreased 10.4%. CALENDAR YEAR 2010 SITUATION CURRENT ACCOUNT In original terms, the balance on current account for 2010 was a deficit of $34.7b, a 35% decrease on the deficit of $53.2b recorded for 2009. The balance on goods and services surplus was $16.6b, a turnaround of $20.6b on the deficit of $4.1b recorded in 2009. Goods credits increased $34.1b (17%) and goods debits increased $10.8b (5%). The 2010 services deficit of $3.2b was an increase of $2.7b on the deficit of $0.5b in 2009. The 2010 net primary income deficit increased $1.9b (4%), with an increase in primary income credits of $6.1b (17%) and an increase in primary income debits of $8.0b (10%). The 2010 secondary income deficit increased $0.2b (12%), with an increase in secondary income credits of $0.2b (3%) and an increase in secondary income debits of $0.3b (4%). FINANCIAL ACCOUNT The balance on financial account recorded a net inflow of $35.3b, with a net inflow on debt of $37.2b and a net outflow on equity of $1.9b. This result was down $20.2b on the net inflow of $55.5b recorded for the previous year as a result of:
INTERNATIONAL INVESTMENT POSITION Australia's net international investment position as at 31 December 2010 was a net foreign liability of $782.1b. This was up $7.2b (1%) on the position a year earlier as a result of:
During 2010, Australia's net foreign equity liability increased to $131.8b, up $14.5b (12%) on the previous calendar year, with exchange rate changes of $50.4b partially offset by price changes of -$26.3b, other changes of -$7.6b and net transactions of -$1.9b. Australia's net foreign debt liability was $650.3b, down $7.3b (1%) on the previous calendar year, with exchange rate changes of -$40.3b and price changes of -$5.6b partially offset by net transactions of $37.2b and other changes of $1.4b. At 31 December 2010, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 30 September 2010 using current prices) was 59.4%. This compares with 62.1% one year ago and 51.3% one decade ago. 1 In this commentary movements in indexes are based on data to four decimal places. <back Document Selection These documents will be presented in a new window.
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