5302.0 - Balance of Payments and International Investment Position, Australia, Dec 2017 
Quality Declaration
Quality Declaration ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 06/03/2018
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ANALYSIS AND COMMENTS
In seasonally adjusted current price terms, the December quarter 2017 current account deficit was $14,024m, a rise of $3,011m on the September quarter 2017 deficit. In trend current price terms, the December quarter 2017 current account deficit was $13,672m, a rise of $2,072m on the September quarter 2017 deficit. The contributors to the current account balance, in seasonally adjusted and trend terms at current prices, are shown in the following table.
TERMS OF TRADE(footnote 1) Australia's seasonally adjusted terms of trade on net goods and services for the December quarter 2017 rose 0.1% to 115.1, with an increase of 1.6% in the implicit price deflator (IPD) for goods and services credits and an increase of 1.5% in the IPD for goods and services debits. In trend terms, the terms of trade for net goods and services fell 1.5% to 114. BALANCE ON GOODS AND SERVICES In seasonally adjusted chain volume terms, the balance on goods and services was a deficit of $13,081m, a rise of $2,064m on the September quarter 2017 deficit of $11,017m. The net deficit on goods rose $2,290m on the September quarter 2017 deficit of $9,019m. Goods credits fell $1,117m (2%) and goods debits rose $1,173m (2%). The net deficit on services fell $226m on the September quarter 2017 deficit of $1,998m. The rise in the balance on goods and services deficit, in seasonally adjusted chain volume terms, is expected to detract 0.5 percentage points from growth in the December quarter 2017 chain volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the September quarter 2017. Goods The trend estimate of net goods at current prices for the December quarter 2017 was a surplus of $459m, a fall of $2,027m on the September quarter 2017 surplus of $2,486m. In seasonally adjusted terms at current prices, net goods was a surplus of $553m, a fall of $1,922m on the September quarter 2017 surplus of $2,475m.
GOODS CREDITS The trend estimate of goods credits at current prices fell $1,209m (2%) to $73,909m in the December quarter 2017. In seasonally adjusted terms at current prices, goods credits rose $140m to $74,561m, with volumes down 2% and prices up 2%. Rural Goods Exports of rural goods, in seasonally adjusted terms at current prices, fell $959m (8%) to $11,437m, with volumes down 10% and prices up 2%. The main components contributing to the fall were:
Non-rural Goods Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $711m (1%) to $58,239m, with prices up 1%. The main components contributing to the rise were:
Partly offsetting these rises was transport equipment, down $261m (22%), with volumes down 22% and prices up 1%. Net Exports of Goods Under Merchanting Net exports of goods under merchanting, in seasonally adjusted terms at current prices, rose $35m (28%), with volumes up 27% and prices up 1%. Non-monetary Gold Non-monetary gold, in original and seasonally adjusted terms at current prices, rose $353m (8%), with volumes up 5% and prices up 2%. GOODS DEBITS The trend estimate of goods debits at current prices rose $818m (1%) to $73,450m in the December quarter 2017. In seasonally adjusted terms at current prices, goods debits rose $2,062m (3%) to $74,008m, with volumes up 2% and prices up 1%. Consumption Goods Imports of consumption goods, in seasonally adjusted terms at current prices, rose $1,353m (6%) to $25,835m, with volumes up 5% and prices up 1%. The main components contributing to the rise were:
Capital Goods Imports of capital goods, in seasonally adjusted terms at current prices, fell $1,457m (8%) to $16,956m, with volumes down 6% and prices down 2%. The main components contributing to the fall were:
Partly offsetting these falls was telecommunications equipment, up $829m (31%), with volumes up 33% and prices down 2%. Intermediate and Other Merchandise Goods Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $2,254m (8%) to $30,011m, with volumes up 4% and prices up 4%. The main components contributing to the rise were:
Non-monetary Gold Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, fell $87m (7%), with volumes down 9% and prices up 3%. SERVICES The trend estimate of net services at current prices was a deficit of $610m, a rise of $65m on the September quarter 2017 deficit of $545m. In seasonally adjusted terms at current prices, net services was a deficit of $669m, a rise of $171m on the September quarter 2017 deficit of $498m.
Services Credits Services credits, in seasonally adjusted terms at current prices, fell $281m (1%) to $21,500m, with volumes down 2% and prices up 1%. The main components contributing to the fall were:
In seasonally adjusted terms, tourism related services credits fell $155m (1%) to $14,853m. Services Debits Services debits, in seasonally adjusted terms at current prices, fell $109m to $22,170m, with volumes down 3% and prices up 2%. The main components contributing to the fall were:
Partly offsetting these falls was transport, up $373m (9%) with volumes up 9%. In seasonally adjusted terms, tourism related services debits fell $235m (2%) to $12,829m. PRIMARY INCOME The trend estimate of the net primary income deficit at current prices fell $34m to $13,306m in the December quarter 2017. In seasonally adjusted terms at current prices, the net primary income deficit rose $899m (7%) to $13,666m in the December quarter 2017. Primary Income Credits Primary income credits, in seasonally adjusted terms at current prices, rose $225m (2%) to $14,433m. The main component contributing to the rise was portfolio investment assets, income on equity and investment fund shares, up $293m (6%). Primary Income Debits Primary income debits, in seasonally adjusted terms at current prices, rose $1,124m (4%) to $28,099m. The main component contributing to the rise was direct investment liabilities, investment income on equity and investment fund shares, up $1,036m (10%). SECONDARY INCOME The trend estimate of the net secondary income deficit at current prices rose $14m to $215m in the December quarter 2017. In seasonally adjusted terms at current prices, the net secondary income deficit rose $17m to $241m in the December quarter 2017. CAPITAL ACCOUNT In original terms, the capital account deficit was $413m, an increase of $290m on the September quarter 2017 deficit of $123m. Capital account credits decreased $3m (60%) and capital account debits increased $287m in the December quarter 2017. FINANCIAL ACCOUNT The balance on the financial account, in original terms, recorded a net inflow of $14.0b, which was driven by a net inflow of debt of $13.4b and net inflow of equity of $0.6b. The financial account surplus increased $1.2b from $12.8b to $14.0b in the December quarter 2017. Direct Investment Direct investment recorded a net inflow of $1.9b in the December quarter 2017, a decrease of $4.1b on the net inflow of $6.0b in the September quarter 2017, where:
Portfolio Investment Portfolio investment recorded a net inflow of $12.0b in the December quarter 2017, a turnaround of $12.9b on the net outflow of $0.8b in the September quarter 2017, where:
Financial Derivatives Financial derivatives recorded a net outflow of $3.9b in the December quarter 2017, a decrease of $1.8b on the net outflow of $5.7b in the September quarter 2017. Other Investment Other investment recorded a net inflow of $16.8b in the December quarter 2017, an increase of $13.6b on the net inflow of $3.2b in the September quarter 2017. This was driven by net inflows of $14.5b in currency and deposits and $4.0b in loans. Reserve Assets Reserve assets recorded an outflow of $12.8b in the December quarter 2017, a turnaround of $22.9b on the inflow of $10.1b in the September quarter 2017. INTERNATIONAL INVESTMENT POSITION (IIP) Australia's net IIP liability position was $986.2b at 31 December 2017, an increase of $27.8b (3%) on the revised 30 September 2017 position of $958.4b. Australia's net foreign debt liabilities increased $19.6b (2%) to $1,010.0b. Australia's net foreign equity assets decreased $8.3b (26%) to $23.8b at 31 December 2017. The changes contributing to this result are shown in the following table.
SUPPLEMENTARY INFORMATION CONDITIONS The conditions in the global economy showed modest growth in Australia’s major trading partner countries in the December quarter 2017. 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 (1.6%), Indonesia (1.3%), the USA (0.6%), France (0.6%), Euro 28 (0.6%), the UK (0.5%), Japan (0.1%) and South Korea (-0.2%).
The Australian share market, as measured by the MSCI global index(footnote 3) increased 6.2% in the December quarter 2017, following a decrease of 0.5% in the September quarter 2017. Increases were recorded in Japan (8.4%), Singapore (7.8%), Hong Kong (6.3%), the USA (6.0%), the UK (4.1%), Canada (3.9%), New Zealand (2.6%), Switzerland (2.5%) and Germany (1.2%). A decrease was recorded in France (-0.3%). A market price change of -$19.7b was recorded for foreign equity assets and $41.0b in foreign equity liabilities in the December quarter 2017. According to Intercontinental Exchange(footnote 4), the composite corporate benchmark yields decreased in Australia from 3.31% to 3.18%, the UK from 2.31% to 2.22% and Germany from 0.89% to 0.88% over the December quarter 2017. The yields increased in the USA from 3.21% to 3.30% over the December quarter 2017. The yields in Japan remained the same at 0.29% over the December quarter 2017. The long-term 10 year government bond yields decreased in Australia from 2.70% to 2.58%, the UK from 1.37% to 1.19%, Germany from 0.46% to 0.42% and Japan from 0.06% to 0.05% over the December quarter 2017. The yields increased in the USA from 2.33% to 2.40% over the December quarter 2017. A market price change of $1.4b was recorded for portfolio debt securities assets and $1.4b in portfolio debt securities liabilities in the December quarter 2017. The Australian dollar saw mixed movements against major currencies in the December quarter 2017. The dollar appreciated 1.1% against the New Zealand dollar, 0.44% against the Canadian dollar, 0.21% against the Swiss franc and 0.09% against the Indonesian rupiah. The dollar depreciated 7.02% against the South Korean won, 4.46% against the Malaysian ringgit, 2.90% against the Chinese renminbi, 2.75% against the Thai baht, 2.73% against the New Taiwan dollar, 2.67% against the Indian rupee, 2.14% against the Singapore dollar, 1.92% against the European euro. 0.82% against the UK pound sterling, 0.57% against the Vietnamese dong, 0.50% against the US dollar, 0.43% against the Japanese yen and 0.39% against the Hong Kong dollar. The Trade Weighted Index (TWI)(footnote 4,footnote 5) fell by 1.96% to 64.90 in the December quarter 2017. These movements were reflected in exchange rate changes for foreign assets of -$15.0b and foreign liabilities of $7.4b in the December quarter 2017. RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6) In original terms, the IPD for total goods credits rose 2.0% and the chain Laspeyres price index for goods exports rose 3.1%. The Export Price Index (EPI)(footnote 7) rose 2.8% during the December quarter 2017. In original terms, the IPD for total goods debits rose 1.0% and the chain Laspeyres price index for goods imports rose 1.9%. The Import Price Index (IPI)(footnote 7) rose 2.0% during the December quarter 2017. 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.
Commodity Price Indexes The RBA Commodity Price Index (average monthly index) for rural commodities increased 2.2% between the September quarter 2017 and the December quarter 2017 while the EPI for rural goods increased 1.5%. The RBA Commodity Price Index for non-rural commodities increased 2.8% between the September quarter 2017 and the December quarter 2017 while the EPI for non-rural goods total (excluding non-monetary gold) increased 3.1%. 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 2017 SITUATION CURRENT ACCOUNT In original terms, the balance on current account in 2017 was a deficit of $42.4b, a fall of $9.1b on the deficit of $51.5b recorded in 2016. The balance on goods and services was a surplus of $11.6b, a turnaround of $25.3b on the deficit of $13.7b recorded in 2016. The 2017 goods surplus of $14.0b was a turnaround of $21.8b on the deficit of $7.9b in 2016. The 2017 services deficit of $2.4b was a fall of $3.4b on the deficit of $5.8b in 2016. The 2017 net primary income deficit rose $15.6b, with a rise in primary income credits of $0.3b (1%) and a rise in primary income debits of $16.0b (17%). The 2017 secondary income deficit rose $0.5b, with a rise in secondary income credits of $0.1b (1%) and a rise in secondary income debits of $0.6b (7%). FINANCIAL ACCOUNT The balance on financial account recorded a net inflow of $43.8b, with a net inflow on equity of $43.3b and a net outflow on debt of $0.5b. This result was a decrease of $8.3b on the net inflow of $52.1b recorded for the previous year as a result of:
INTERNATIONAL INVESTMENT POSITION Australia's net international investment position as at 31 December 2017 was a net foreign liability of $986.2b. This was an increase of $8.7b (1%) on the position a year earlier as a result of:
During 2017, Australia's net foreign equity asset decreased $6.2b (21%) on the previous year, to a net asset position of $23.8b, with net transactions of $43.3b, price changes of -$52.2b, exchange rate changes of $30.3b and other changes of -$15.2b. Australia's net foreign debt liability increased $2.5b on the previous year, to a net liability position of $1,010.0b, with net transactions of $0.5b, price changes of $8.5b, exchange rate changes of -$14.0b and other changes of $7.5b. At 31 December 2017, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 30 September 2017 using current prices) was 55.3%. This compares with 57.5% one year ago. 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 19 February 2018. <back 3 MSCI Global Market Indexes 2017, Morgan Stanley Capital International, viewed 8 January 2018. <back 4 Intercontinental Exchange, viewed 5 January 2018. The Index data referenced herein is the property of ICE Data Indices, LLC, its affiliates ("ICE Data") and or its Third Party Suppliers and has been licensed for use by The Australian Bureau of Statistics. ICE Data and its Third Party Suppliers accept no liability in connection to its use. See https://www.theice.com/publicdocs/IDI_-_Terms_and_Conditions_for_the_Index_Data_and_Custom_Index_Services.pdf for a full copy of the Disclaimer. <back 5 Exchange Rates – Daily 2014 to Current, Reserve Bank of Australia - Statistical Tables, viewed 5 January 2018. <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 Document Selection These documents will be presented in a new window.
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