5302.0 - Balance of Payments and International Investment Position, Australia, Dec 2012 Quality Declaration 
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

In original current price terms, the December quarter 2012 current account deficit was $15,562m, a fall of $822m (5%) on the September 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 - December Quarter 2012

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

Seasonally Adjusted

Balance on current account
-14 678
370
2.5
Balance on goods and services
-5 553
-164
-3.0
Net goods
-2 112
-125
-6.3
Net services
-3 441
-39
-1.1
Net primary income
-8 829
518
5.5
Net secondary income
-296
16
5.1

Trend

Balance on current account
-14 859
-919
-6.6
Balance on goods and services
-5 727
-1 048
-22.4
Net goods
-2 235
-875
-64.3
Net services
-3 493
-174
-5.2
Net primary income
-8 832
116
1.3
Net secondary income
-300
12
3.8




VOLUMES AND PRICES

Goods and Services

In seasonally adjusted chain volume terms, the balance on goods and services was a surplus of $3,816m, a rise of $2,153m (129%) on the September quarter 2012 surplus of $1,663m.

The net surplus on goods rose $2,110m (37%) on the September quarter 2012 surplus of $5,717m. Goods credits rose $2,670m (4%) and goods debits rose $560m (1%). The net deficit on services fell $43m (1%) on the September quarter 2012 deficit of $4,054m.

The increase in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to contribute 0.6 percentage points to growth in the December quarter 2012 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the September 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 2.7% to 88.8 with a decrease of 2.3% in the implicit price deflator (IPD) for goods and services credits and an increase of 0.5% in the IPD for goods and services debits.

In trend terms, the terms of trade for net goods and services fell 2.9% to 89.3.

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 $2,235m, a rise of $875m (64%) on the September quarter 2012 deficit of $1,360m.

In seasonally adjusted terms at current prices, net goods was a deficit of $2,112m, a rise of $125m (6%) on the September quarter 2012 deficit of $1,987m.

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

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

Exports
686
1.1
3.9
-2.7
Rural goods
224
2.6
0.1
2.5
Non-rural goods
261
0.5
4.9
-4.2
Net exports of goods under merchanting
-40
-70.2
-71.6
3.1
Non-monetary gold
240
5.9
0.7
5.1
Imports
811
1.3
0.9
0.4
Consumption goods
474
2.8
3.1
-0.3
Capital goods
604
3.6
4.2
-0.6
Intermediate and other merchandise goods
48
0.2
-1.5
1.7
Non-monetary gold
-314
-19.6
-23.1
4.5

(a) Reference year 2010-11



Services

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

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

Exports
48
0.4
-
0.4
Manufacturing services on physical inputs owned by others
-
-
-
-
Maintenance and repair services n.i.e.
-1
-7.1
-7.7
0.8
Transport
6
0.4
-0.1
0.6
Travel
-54
-0.7
-0.9
0.2
Other services
95
2.6
2.0
0.7
Imports
87
0.5
-0.3
0.8
Manufacturing services on physical inputs owned by others
-
-
-
-
Maintenance and repair services n.i.e.
-5
-3.6
-5.0
1.0
Transport
191
4.6
5.4
-0.8
Travel
70
1.0
-0.5
1.6
Other services
-169
-3.2
-4.2
1.0

- nil or rounded to zero (including null cells)
(a) Reference year 2010-11



GOODS CREDITS

The trend estimate of goods credits at current prices fell $921m (1%) to $60,901m in the December quarter 2012.

In seasonally adjusted terms at current prices, goods credits rose $686m (1%) to $61,197m,with volumes up 4% and prices down 3%.


Rural Goods

Exports of rural goods, in seasonally adjusted terms at current prices, rose $224m (3%) to $8,925m, with prices up 3%. The main components contributing to the rise were:
  • other rural, up $346m (9%), with volumes up 9%
  • meat and meat preparations, up $107m (6%), with volumes up 8% and prices down 2%.

Partly offsetting these rises was the cereal grains and cereal preparations component, down $275m (11%), with volumes down 22% and prices up 14%.


Non-rural Goods

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $261m (1%) to $47,915m, with volumes up 5% and prices down 4%. The main component contributing to the rise was metal ores and minerals, up $785m (4%), with volumes up 6% and prices down 2%.

Partly offsetting this rise were:
  • coal, coke and briquettes, down $239m (2%), with volumes up 14% and prices down 15%
  • other mineral fuels, down $224m (3%), with volumes down 5% and prices up 2%.
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, fell $40m (70%) to $17m, with volumes down 72% and prices up 3%.


Non-monetary Gold

Non-monetary gold, in original and seasonally adjusted terms at current prices, rose $240m (6%) to $4,339m, with volumes up 1% and prices up 5%.


GOODS DEBITS

The trend estimate of goods debits at current prices fell $47m to $63,136m in the December quarter 2012.

In seasonally adjusted terms at current prices, goods debits rose $811m (1%) to $63,308m, with volumes up 1%.


Consumption Goods

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $474m (3%) to $17,255m with volumes up 3%. The main component contributing to the rise was non-industrial transport equipment, up $303m (7%), with volumes up 6% and prices up 1%.


Capital Goods

Imports of capital goods, in seasonally adjusted terms at current prices, rose $604m (4%) to $17,347m with volumes up 4% and prices down 1%. The main component contributing to the rise was capital goods n.e.s., up $1,047m (33%), with volumes up 34% and prices down 1%.

Partly offsetting this rise was the civil aircraft and confidentialised items component, down $319m (22%), with volumes down 22%.


Intermediate and Other Merchandise Goods

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $48m to $27,419m, with volumes down 1% and prices up 2%. The main components contributing to the rise were:
  • fuels and lubricants, up $347m (4%), with prices up 4%
  • processed industrial supplies n.e.s., up $163m (3%), with volumes up 3%.

Partly offsetting these rises was the other parts for capital goods component, down $353m (10%), with volumes down 10%.


Non-monetary Gold

Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, fell $314m (20%) to $1,288m, with volumes down 23% and prices up 4%.


SERVICES

The trend estimate of net services at current prices was a deficit of $3,493m, a rise of $174m (5%) on the September quarter 2012 deficit of $3,319m.

In seasonally adjusted terms at current prices, net services was a deficit of $3,441m, a rise of $39m (1%) on the September quarter 2012 deficit of $3,402m.


Services Credits

Services credits, in seasonally adjusted terms at current prices, rose $48m to $13,019m. The main component contributing to the rise was other services, up $95m (3%), with volumes up 2% and prices up 1%.

Partly offsetting this rise was the travel component, down $54m (1%), with volumes down 1%.

In seasonally adjusted terms, tourism related service credits fell $65m (1%) to $8,433m.


Services Debits

Services debits, in seasonally adjusted terms at current prices, rose $87m (1%) to $16,460m, with prices up 1%. The main component contributing to the rise was transport, up $191m (5%), with volumes up 5% and prices down 1%.

Partly offsetting this rise was other services, down $169m (3%), with volumes down 4% and prices up 1%.

In seasonally adjusted terms, tourism related service debits rose $200m (2%) to $8,693m.


PRIMARY INCOME

The trend estimate of the net primary income deficit at current prices fell $116m (1%) to $8,832m in the December quarter 2012.

In seasonally adjusted terms, the net primary income deficit fell $518m (6%) to $8,829m in the December quarter 2012.

NET PRIMARY INCOME
Graph: NET PRIMARY INCOME



Primary Income Credits

Primary income credits, in seasonally adjusted terms at current prices, rose $58m (1%) to $10,259m. The main component contributing to the rise was portfolio investment assets, income on equity and investment fund shares, up $110m (4%).

Partly offsetting this rise was a $81m (2%) fall in direct investment assets, income on equity and investment fund shares.


Primary Income Debits

Primary income debits, in seasonally adjusted terms at current prices, fell $461m (2%) to $19,088m. The main components contributing to the fall were:
  • portfolio investment liabilities, interest, down $281m (5%)
  • direct investment liabilities, income on equity and investment fund shares, down $173m (2%).

Partly offsetting these falls was a $105m (15%) increase in other investment liabilities.


SECONDARY INCOME

The trend estimate of the net secondary income deficit at current prices, fell $12m (4%) to $300m in the December quarter 2012.

In seasonally adjusted terms, the net secondary income deficit at current prices, fell $16m (5%) to $296m in the December quarter 2012.


FINANCIAL ACCOUNT

The balance on financial account, in original terms, recorded a net inflow of $15.6b, with a net inflow of $5.1b of equity and a net inflow of $10.5b of debt.

The financial account surplus decreased $1.2b, from $16.8b in September quarter 2012 to $15.6b in December quarter 2012.

Direct investment recorded a net inflow of $13.1b in December quarter 2012, an increase of $4.6b from the net inflow of $8.5b in September quarter 2012, where:
  • direct investment assets recorded an outflow of $7.4b, an increase of $1.1b on the outflow of $6.4b in September quarter 2012
  • direct investment liabilities recorded an inflow of $20.6b, an increase of $5.7b on the inflow of $14.9 in September quarter 2012.

Portfolio investment recorded a net inflow of $4.7b, an increase of $3.9b on the net inflow of $0.8b in September quarter 2012, where:
  • equity and investment fund shares recorded a net outflow of $1.4b
  • debt securities recorded a net inflow of $6.1b.

Financial derivatives recorded a net outflow of $5.3b, a turnaround of $6.8b from the net inflow of $1.5b in September quarter 2012.

Other investment recorded a net inflow of $5.9b, an increase of $2.2b from the net inflow of $3.6b in September quarter 2012.

Reserve assets recorded a net outflow of $2.8b, a turnaround of $5.2b from the net inflow of $2.4b in September quarter 2012.


INTERNATIONAL INVESTMENT POSITION


ANALYSIS

Australia's net international investment position at 31 December 2012 was a net foreign liability of $870.0b, up $6.2b on the 30 September 2012 position of $863.9b.

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

INTERNATIONAL INVESTMENT POSITION, Summary - December Quarter 2012

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

Position at beginning of period
863 850
116 380
747 470
Changes in position reflecting
Transactions
15 635
5 117
10 519
Price changes
-10 394
-7 920
-2 474
Exchange rate changes
1 739
-1 204
2 943
Other adjustments
-791
-2 158
1 367
Total changes
6 190
-6 165
12 355
Position at end of period
870 040
110 215
759 825




SUPPLEMENTARY INFORMATION


CONDITIONS

Global growth is forecast to be a little below average in the December 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 (2.0%), USA (0.0%), UK (-0.3%) and Germany (-0.6%).

Australia's international investment activities during the quarter were as follows:
  • foreign asset transactions were -$17.3b in December quarter 2012 compared to -$4.2b in September quarter 2012
  • foreign liability transactions were $33.0b in December quarter 2012 compared to $21.1b in September quarter 2012.

The Australian share market, as measured by the MSCI global index, increased by 6.0% in December quarter 2012 following an increase of 7.2% in September quarter 2012. There were increases in all major markets (except for USA): Japan 17.4%, Europe (excluding UK) 8.4%, France 7.9%, Germany 5.9%, Hong Kong 5.2%, Switzerland 5.2%, New Zealand 5.0%, United Kingdom 2.8%, Singapore 2.3%, Canada 1.3%. The USA decreased 0.9%. A market price change of $10.9b was recorded for foreign equity liabilities and -$18.8b for foreign equity assets during December quarter 2012.

According to Bloomberg, the corporate benchmark composite yield decreased in Australia from 4.58% to 4.28%, in UK from 3.66% to 3.39%, in USA from 2.87% to 2.77%, in Germany from 2.47% to 1.96% and the yield increased in Japan from 0.64% to 0.67%. Long term government bond yields increased in the major markets in December quarter 2012. The 10 year government bond yields increased in UK from 1.72% to 1.85%, in the USA from 1.65% to 1.78%, in Japan from 0.78% to 0.79% and in Australia from 3.09% to 3.23%. In Germany, the yield decreased from 1.41% to 1.30%. This is reflected in the market price changes for both portfolio debt securities liabilities of -$6.3b and assets of $0.9b in December quarter 2012.

The Australian dollar fell against some major currencies and appreciated against others in December quarter 2012. It decreased 3.0% against Swiss franc, 2.8% against Euro, 2.7% against Norwegian Krone, 2.3% against Danish Kronor, 1.7% against Chinese renminbi, 1.0% against Singapore dollar, 0.9% against Swedish Krona, 0.8% against Hong Kong dollar and 0.8% against US dollar. The Australian dollar increased 10.4% against Japanese yen, 3.2% against Indian rupee, 2.5% against UK pound sterling and 0.9% against Canadian dollar. The Trade weighted Index (TWI) recorded an increase of 0.3%. This is reflected in the exchange rate changes for foreign liabilities of $1.8b and foreign assets of -$0.1b in December quarter 2012.


RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 1)

In original terms, the IPD for total goods credits fell 4.74% and the chain Laspeyres price index for goods exports fell 3.49%. The export price index (EPI) fell 2.4% during the December quarter 2012.

In original terms, the IPD for total goods debits fell 0.03% and the chain Laspeyres price index for goods imports rose 0.29%. The import price index (IPI) rose 0.3% during the December 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 December quarter 2012, differences between the IPD and EPI were mainly due to the 'wool and sheepskins', 'coal, coke and briquettes' and 'cereal grains and cereal preparations' components.

GOODS AND SERVICES, Price comparison - December Quarter 2012

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

Exports
Goods
-2.7
-4.7
-2.4
-3.5
Services
0.4
0.4
na
0.5
Imports
Goods
0.4
-
0.3
0.3
Services
0.8
0.9
na
0.8

- nil or rounded to zero (including null cells)
na not available
(a) Reference year 2010-11
(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(footnote 2) (average monthly index) for rural commodities increased 2.1% between the September quarter 2012 and December quarter 2012 while the EPI for rural goods also increased 2.1%.

The RBA Commodity Price Index for non-rural commodities decreased 4.4% while the EPI for non-rural goods total (excluding non-monetary gold) decreased 3.8%.

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.


CALENDAR YEAR 2012 SITUATION


CURRENT ACCOUNT

In original terms, the balance on current account for 2012 was a deficit of $54.4b, an increase of $22.0b (68%) on the deficit of $32.4b recorded for 2011. The balance on goods and services deficit was $15.9b, a turnaround of $35.0b on the surplus of $19.0b recorded in 2011. Goods credits decreased $13.4b (5%) and goods debits increased $17.8b (8%).

The 2012 services deficit of $12.6b was an increase of $3.8b (43%) on the deficit of $8.8b in 2011.

The 2012 net primary income deficit decreased $12.8b (26%), with a decrease in primary income credits of $0.7b (2%) and a decrease in primary income debits of $13.5b (15%).

The 2012 net secondary income deficit decreased $0.1b (9%), with an increase in secondary income credits of $0.4b (5%) and an increase in secondary income debits of $0.3b (3%).


FINANCIAL ACCOUNT

The balance on financial account recorded a net inflow of $55.3b, with a net inflow on debt of $34.5b and a net inflow on equity of $20.8b. This result was up $23.0b on the net inflow of $32.3b recorded for the previous year as a result of:
  • a turnaround of $35.3b to the net inflow on other investment
  • a decrease of $18.4b on the net inflow on portfolio investment
  • a decrease of $14.4b on the net outflow on financial derivatives
  • a decrease of $10.0b on the net inflow on direct investment
  • a decrease of $1.8b on the net outflow on reserve assets.


INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position as at 31 December 2012 was a net foreign liability of $870.0b. This was up $36.5b (4%) on the position a year earlier as a result of:
  • net transactions of $55.3b
  • exchange rate changes of $4.7b
  • price changes of -$20.1b
  • other changes of -$3.5b.

During 2012, Australia's net foreign equity liability decreased to $110.2b, down $0.4b on the previous calendar year, with exchange rate changes of $3.8b and net transactions of $20.8b partially offset by price changes of -$19.8b and other changes of -$5.1b.

Australia's net foreign debt liability rose to $759.8b, up $36.8b (5%) on the previous calendar year, with exchange rate changes of $0.9b, price changes of -$0.3b, net transactions of $34.5b and other changes of $1.6b.

At 31 December 2012, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 30 September 2012 using current prices) was 58.7%. This compares with 57.7% one year ago and 49.9% 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. <back