5302.0 - Balance of Payments and International Investment Position, Australia, Dec 2018 
Quality Declaration
Quality Declaration ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 05/03/2019
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ANALYSIS AND COMMENTS
In seasonally adjusted current price terms, the December quarter 2018 current account deficit was $7,203m, a fall of $3,582m on the September quarter 2018 deficit. In trend current price terms, the December quarter 2018 current account deficit was $8,405m, a fall of $1,581m on the September quarter 2018 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 2018 rose 3.1% to 106.6, with an increase of 4.0% in the implicit price deflator (IPD) for goods and services credits and an increase of 0.8% in the IPD for goods and services debits. In trend terms, the terms of trade for net goods and services rose 1.2% to 105.3. BALANCE ON GOODS AND SERVICES In seasonally adjusted chain volume terms, the balance on goods and services was a surplus of $1,241m, a fall of $781m on the September quarter 2018 surplus of $2,022m. The net surplus on goods fell $894m on the September quarter 2018 surplus of $2,283m. Goods credits fell $681m (1%) and goods debits rose $213m. The net deficit on services fell $113m on the September quarter 2018 deficit of $261m. 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 December quarter 2018 chain volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the September quarter 2018. Goods The trend estimate of net goods at current prices for the December quarter 2018 was a surplus of $8,783m, a rise of $1,584m on the September quarter 2018 surplus of $7,199m. In seasonally adjusted terms at current prices, net goods was a surplus of $9,602m, a rise of $2,656m on the September quarter 2018 surplus of $6,946m.
GOODS CREDITS The trend estimate of goods credits at current prices rose $2,450m (3%) to $90,147m in the December quarter 2018. In seasonally adjusted terms at current prices, goods credits rose $3,525m (4%) to $90,868m, with volumes down 1% and prices up 5%. Rural Goods Exports of rural goods, in seasonally adjusted terms at current prices, fell $555m (5%) to $11,683m, with volumes down 6% and prices up 1%. The main components contributing to the fall were:
Non-rural Goods Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $5,592m (8%) to $75,318m, with volumes up 3% and prices up 5%. The main components contributing to the rise were:
Net Exports of Goods Under Merchanting Net exports of goods under merchanting, in seasonally adjusted terms at current prices, rose $46m (72%) to $110m, with volumes up 60% and prices up 7%. Non-monetary Gold Exports of non-monetary gold, in original and seasonally adjusted terms at current prices, fell $1,559m (29%) to $3,757m, with volumes down 32% and prices up 3%. GOODS DEBITS The trend estimate of goods debits at current prices rose $867m (1%) to $81,365m in the December quarter 2018. In seasonally adjusted terms at current prices, goods debits rose $869m (1%) to $81,266m, with prices up 1%. Consumption Goods Imports of consumption goods, in seasonally adjusted terms at current prices, rose $360m (1%) to $26,209m, with volumes up 1% and prices up 1%. The main components contributing to the rise were:
Partly offsetting these rises was non-industrial transport equipment, down $243m (4%), with volumes down 5% and prices up 1%. Capital Goods Imports of capital goods, in seasonally adjusted terms at current prices, rose $201m (1%) to $19,359m, with prices up 1%. The main components contributing to the rise were:
Partly offsetting these rises was industrial transport equipment n.e.s., down $456m (13%), with volumes down 12% and prices down 1%. Intermediate and Other Merchandise Goods Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $590m (2%) to $34,497m, with volumes up 1%. The main components contributing to the rise were:
Partly offsetting these rises was primary industrial supplies n.e.s., down $192m (27%), with volumes down 32% and prices up 7%. Non-monetary Gold Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, fell $282m (19%) to $1,202m, with volumes down 22% and prices up 3%. SERVICES The trend estimate of net services at current prices was a deficit of $1,193m, a rise of $71m on the September quarter 2018 deficit of $1,122m. In seasonally adjusted terms at current prices, net services was a deficit of $1,177m, a fall of $5m on the September quarter 2018 deficit of $1,182m.
Services Credits Services credits, in seasonally adjusted terms at current prices, rose $151m (1%) to $23,749m, with prices up 1%. The main component contributing to the rise was travel, up $194m (1%), with volumes up 1% and prices up 1%. Partly offsetting this rise was other services, down $62m (1%), with volumes down 1%. In seasonally adjusted terms, tourism related services credits rose $212m (1%) to $16,393m. Services Debits Services debits, in seasonally adjusted terms at current prices, rose $146m (1%) to $24,926m, with prices up 1%. The main components contributing to the rise were:
In seasonally adjusted terms, tourism related services debits rose $111m (1%) to $14,377m. PRIMARY INCOME The trend estimate of the net primary income deficit at current prices fell $94m to $15,662m in the December quarter 2018. In seasonally adjusted terms at current prices, the net primary income deficit fell $848m to $15,318m in the December quarter 2018. Primary Income Credits Primary income credits, in seasonally adjusted terms at current prices, rose $288m (2%) to $17,177m. The main component of investment income contributing to the rise was portfolio investment assets, income on equity and investment fund shares, up $251m (4%). Primary Income Debits Primary income debits, in seasonally adjusted terms at current prices, fell $559m (2%) to $32,496m. The main component of investment income contributing to the fall was direct investment liabilities, income on equity and investment fund shares, down $1,135m (7%). SECONDARY INCOME The trend estimate of the net secondary income deficit at current prices rose $26m to $333m in the December quarter 2018. In seasonally adjusted terms at current prices, the net secondary income deficit fell $74m to $309m in the December quarter 2018. CAPITAL ACCOUNT In original terms, the capital account deficit was $193m, an increase of $18m on the September quarter 2018 deficit of $175m. Capital account credits decreased $1m (33%) and capital account debits increased $17m (10%) in the December quarter 2018. FINANCIAL ACCOUNT The balance on the financial account, in original terms, recorded a net inflow of $10.1b, which was driven by a net inflow of debt of $17.6b and a net outflow of equity of $7.6b. The financial account surplus decreased $3.0b from $13.1b in the September quarter 2018, to $10.1b in the December quarter 2018. Direct Investment Direct investment recorded a net inflow of $30.4b in the December quarter 2018, an increase of $25.7b on the net inflow of $4.7b in the September quarter 2018, where:
Portfolio Investment Portfolio investment recorded a net outflow of $1.3b in the December quarter 2018, a decrease of $19.5b on the net outflow of $20.7b in the September quarter 2018, where:
Financial Derivatives Financial derivatives recorded a net outflow of $4.6b in the December quarter 2018, a turnaround of $6.8b on the net inflow of $2.2b in the September quarter 2018. Other Investment Other investment recorded a net outflow of $15.8b in the December quarter 2018, a turnaround of $41.3b on the net inflow of $25.6b in the September quarter 2018. This was driven by net outflows of $9.3b in loans and net inflows of $4.9b in currency and deposits. Reserve Assets Reserve assets remained steady with an inflow of $1.3b in the December quarter 2018. INTERNATIONAL INVESTMENT POSITION (IIP) Australia's net IIP liability position was $975.7b at 31 December 2018, an increase of $36.5b on the revised 30 September 2018 position of $939.1b. Australia's net foreign debt liability position increased $35.4b to $1,082.9b. Australia's net foreign equity asset position decreased $1.1b to $107.2b at 31 December 2018. The changes contributing to this result are shown in the following table.
SUPPLEMENTARY INFORMATION CONDITIONS The conditions in the global economy showed moderate growth in Australia’s major trading partner countries in the December quarter 2018. 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 (1.5%), Indonesia (1.2%), South Korea (1.0%), Spain (0.7%), the USA (0.6%), Belgium (0.3%), France (0.3%), Japan (0.3%), the Euro 28 (0.2%) and the UK (0.2%).
The Australian share market, as measured by the MSCI global index(footnote 3) decreased 8.4% in the December quarter 2018, a further decrease from -0.2% in the September quarter 2018. Significant decreases were recorded in Japan (17.3%), the USA (14.1%), Germany (14.1%), France (13.9%), Canada (11.1%), China (10.7%), the UK (10.5%), Switzerland (8.1%), New Zealand (8.0%), Singapore (7.3%), Malaysia (6.3%), Hong Kong (4.9%) and India (1.5%). Increases were recorded in Brazil (9.1%) and Indonesia (5.6%). A market price change of $86.3b was recorded for foreign equity assets and -$53.7b for foreign equity liabilities in the December quarter 2018. According to Thomson Reuters(footnote 4), the composite corporate benchmark yields increased in the USA from 4.11% to 4.26%, the UK from 2.62% to 2.74% and Germany from 1.15% to 1.33%. The corporate bond yields decreased in Australia from 3.35% to 3.24% and Japan from 0.38% to 0.37% in the December quarter 2018. The long-term 10 year government bond yields decreased in the USA from 3.05% to 2.69%, the UK from 1.57% to 1.28%, Germany from 0.47% to 0.25%, Japan from 0.13% to 0.00% and Australia from 2.63% to 2.43% over the December quarter 2018. A market price change of $2.3b was recorded for portfolio debt securities assets and $2.8b in portfolio debt securities liabilities in the December quarter 2018. The Australian dollar depreciated against most currencies in the December quarter 2018. The Australian dollar depreciated 5.84% against the Indian rupee, 5.07% against the Indonesian rupiah, 4.92% against the Japanese yen, 3.68% against the New Zealand dollar, 2.40% against the Singaporean dollar, 2.33% against the Chinese renminbi, 2.27% against the US dollar, 2.19% against the Hong Kong dollar, 1.59% against the South Korean won, 1.35% against the Swiss franc, 0.93% against the South African rand and 0.35% against the European euro. The dollar appreciated 3.45% against the Norwegian krone, 2.31% against the Canadian dollar and 0.80% against the UK pound sterling. The Trade Weighted Index (TWI)(footnote 5) fell 2.41% to 60.7 in the December quarter 2018. These movements were reflected in exchange rate changes for foreign assets of -$34.7b and foreign liabilities of $24.9b in the December quarter 2018. RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6) In original terms, the IPD for total goods credits rose 5.0% and the chain Laspeyres price index for goods exports rose 4.1%. The Export Price Index (EPI)(footnote 7) rose 4.4% during the December quarter 2018. In original terms, the IPD for total goods debits rose 0.5% and the chain Laspeyres price index for goods imports rose 0.7%. The Import Price Index (IPI)(footnote 7) rose 0.5% during the December quarter 2018. 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 fell 3.7% between the September quarter 2018 and the December quarter 2018 while the EPI for rural goods rose 1.1%. The RBA Commodity Price Index for non-rural commodities rose 5.0% between the September quarter 2018 and the December quarter 2018 while the EPI for non-rural goods (excluding non-monetary gold) rose 5.0%. 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 2018 SITUATION CURRENT ACCOUNT In original terms, the balance on current account for 2018 was a deficit of $40.8b, a fall of $5.6b on the deficit of $46.4b recorded for 2017. The balance on goods and services was a surplus of $22.1b, a rise of $12.6b on the surplus of $9.5b recorded for 2017. The 2018 goods surplus of $26.7b was a rise of $12.9b on the surplus of $13.8b in 2017. The 2018 services deficit of $4.7b was a rise of $0.4b on the deficit of $4.3b in 2017. The 2018 net primary income deficit rose $7.6b, with a rise in primary income credits of $9.0b (16%) and a rise in primary income debits of $16.6b (15%). The 2018 net secondary income deficit fell $0.7b, with a rise in secondary income credits of $0.2b (2%) and a fall in secondary income debits of $0.4b (4%). FINANCIAL ACCOUNT The balance on financial account recorded a net inflow of $45.2b, with a net inflow on equity of $20.9b and a net inflow on debt of $24.3b. This result was a decrease of $1.1b on the net inflow of $46.3b recorded for the previous year as a result of:
INTERNATIONAL INVESTMENT POSITION Australia's net international investment position as at 31 December 2018 was a net foreign liability of $975.7b. This was an increase of $6.9b (1%) on the position a year ago as a result of:
During 2018, Australia's net foreign equity asset increased $62.3b on the previous year, to a net asset position of $107.2b, with net transactions of $20.9b, price changes of $13.1b, exchange rate changes of -$72.3b and other changes of -$24.0b. Australia's net foreign debt liability increased $69.1b on the previous year, to a net liability position of $1,082.9b, with net transactions of $24.3b, exchange rate changes of $36.1b and other changes of $8.8b. At 31 December 2018, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 30 September 2018 using seasonally adjusted current prices) was 52.1%. This compares with 53.6% 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 18 February 2019. <back 3 MSCI Global Market Indexes 2018, Morgan Stanley Capital International, viewed 8 January 2019. <back 4 Thomson Reuters, viewed 15 January 2019. <back 5 Exchange Rates – Daily 2014 to Current, Reserve Bank of Australia - Statistical Tables, viewed 9 January 2019. <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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