5302.0 - Balance of Payments and International Investment Position, Australia, Jun 2014 
Quality Declaration
Quality Declaration ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 02/09/2014
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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 surplus of $10,657m, a fall of $3,624m (25%) on the March quarter 2014 surplus of $14,281m. The net surplus on goods fell $3,151m (20%) on the March quarter 2014 surplus of $16,093m. Goods credits fell $862m (1%) and goods debits rose $2,289m (4%). The net deficit on services rose $474m (26%) on the March quarter 2014 deficit of $1,812m. The decrease in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to detract 0.9 percentage points from growth in the June quarter 2014 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the March quarter 2014. Terms of Trade and Implicit Price Deflator Australia's seasonally adjusted terms of trade on net goods and services for the June quarter 2014 fell 4.1% to 83.4 with a decrease of 6.3% in the implicit price deflator (IPD) for goods and services credits and a decrease of 2.4% in the IPD for goods and services debits. In trend terms, the terms of trade for net goods and services fell 1.6% to 84.9. Goods The trend estimate of net goods at current prices for the June quarter 2014 was a surplus of $1,762m, a fall of $1,189m (40%) on the March quarter 2014 surplus of $2,951m. In seasonally adjusted terms at current prices, net goods was a deficit of $1,211m, a turnaround of $7,096m on the March quarter 2014 surplus of $5,885m.
Services
GOODS CREDITS The trend estimate of goods credits at current prices fell $762m (1%) to $68,892m in the June quarter 2014. In seasonally adjusted terms at current prices, goods credits fell $6,431m (9%) to $66,193m, with volumes down 1% and prices down 8%. Rural Goods Exports of rural goods, in seasonally adjusted terms at current prices, fell $1,069m (10%) to $9,740m, with volumes down 9% and prices down 1%. The main components contributing to the fall were:
Non-rural Goods Exports of non-rural goods, in seasonally adjusted terms at current prices, fell $4,650m (8%) to $53,308m, with volumes up 1% and prices down 9%. The main components contributing to the fall were:
Net Exports of Goods Under Merchanting Net exports of goods under merchanting, in seasonally adjusted terms at current prices, fell $19m (95%), with volumes down 95% and prices down 13%. Non-monetary Gold Non-monetary gold, in original and seasonally adjusted terms at current prices, fell $693m (18%), with volumes down 15% and prices down 4%. GOODS DEBITS The trend estimate of goods debits at current prices rose $427m (1%) to $67,130m in the June quarter 2014. In seasonally adjusted terms at current prices, goods debits rose $664m (1%) to $67,404m, with volumes up 4% and prices down 3%. Consumption Goods Imports of consumption goods, in seasonally adjusted terms at current prices, fell $204m (1%) to $20,751m, with volumes up 1% and prices down 2%. The main components contributing to the fall were:
Capital Goods Imports of capital goods, in seasonally adjusted terms at current prices, rose $902m (6%) to $15,704m with volumes up 11% and prices down 4%. The main component contributing to the rise was capital goods n.e.s., up $1,097m (65%), with volumes up 76% and prices down 6%. Partly offsetting this rise were:
Intermediate and Other Merchandise Goods Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, fell $93m to $29,963m, with volumes up 2% and prices down 3%. The main components contributing to the fall were:
Partly offsetting these falls was processed industrial supplies n.e.s., up $342m (5%), with volumes up 9% and prices down 4%. Non-monetary Gold Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, rose $59m (6%) to $986m, with volumes up 11% and prices down 4%. SERVICES The trend estimate of net services at current prices was a deficit of $3,358m, a fall of $50m (1%) on the March quarter 2014 deficit of $3,408m. In seasonally adjusted terms at current prices, net services was a deficit of $3,480m, a rise of $162m (5%) on the March quarter 2014 deficit of $3,318m. Services Credits Services credits, in seasonally adjusted terms at current prices, rose $204m (1%) to $14,827m, with volumes up 1% and prices up 1%. The main components contributing to the rise were:
In seasonally adjusted terms, tourism related service credits rose $128m (1%) to $9,238m. Services Debits Services debits, in seasonally adjusted terms at current prices, rose $366m (2%) to $18,307m, with volumes up 4% and prices down 2%. The main components contributing to the rise were:
Partly offsetting these rises were:
In seasonally adjusted terms, tourism related service debits rose $354m (4%) to $9,479m. PRIMARY INCOME The trend estimate of the net primary income deficit at current prices fell $582m (6%) to $9,121m in the June quarter 2014. The seasonally adjusted estimate of the net primary income deficit at current prices fell $1,275m (13%) to $8,605m in the June quarter 2014. Primary Income Credits Primary income credits, in seasonally adjusted terms at current prices, rose $133m (1%) to $12,413m. The main component contributing to the rise was portfolio investment assets, investment income on equity and investment fund shares, rose $302m (9%). Primary Income Debits Primary income debits, in seasonally adjusted terms at current prices, fell $1,142m (5%) to $21,018m. The main component contributing to the fall was direct investment liabilities, income on equity and investment fund shares, fell $1,255m (16%). SECONDARY INCOME The trend estimate of the net secondary income deficit at current prices, fell $28m (6%) to $457m in the June quarter 2014. In seasonally adjusted terms, the net secondary income deficit at current prices, fell $44m (9%) to $446m in the June quarter 2014. FINANCIAL ACCOUNT The balance on financial account, in original terms, recorded a net inflow of $11.0b, which was driven by a net inflow of debt of $9.1b and net inflow of equity of $1.8b. The financial account surplus increased $3.6b to $11.0b in the June quarter 2014, from $7.3b in the March quarter 2014. Direct investment recorded a net inflow of $12.8b in the June quarter 2014, an increase of $4.1b from the net inflow of $8.7b in the March quarter 2014. This was driven by direct investment liabilities which recorded an inflow of $10.6b, an increase of $4.5b on the inflow of $6.0b in the March quarter 2014. Direct investment assets recorded an inflow of $2.2b, a decrease of $0.4b on the inflow of $2.6b in the March quarter 2014. Portfolio investment recorded a net inflow of $10.0b, an increase of $6.1b on the net inflow of $3.9b in the March quarter 2014. This was driven by a net inflow recorded for debt securities of $18.9b, an increase of $11.3b on the inflow of $7.6b in the March quarter 2014, partly offset by equity and investment fund shares which recorded a net outflow of $8.9b, an increase of $5.2b on the outflow of $3.7b in the March quarter 2014. Financial derivatives recorded a net outflow of $4.8b, a turnaround of $5.6b from the net inflow of $0.7b in the March quarter 2014. Other investment recorded a net outflow of $5.7b, an increase of $3.8b on the net outflow of $1.9b in the March quarter 2014. This was driven by a net outflow of $17.5b of loans, an increase of $5.2b on the net outflow of $12.2b in the March quarter 2014. Reserve assets recorded an outflow of $1.2b, a decrease of $2.8b on the outflow of $4.0b in the March quarter 2014. INTERNATIONAL INVESTMENT POSITION ANALYSIS Australia's net international investment position at 30 June 2014 was a net foreign liability of $864.2b, up $16.5b on the 31 March 2014 position of $847.8b. The changes contributing to this result are shown in the following table.
SUPPLEMENTARY INFORMATION CONDITIONS The conditions in the global economy showed modest increases for most countries in the June quarter 2014. According to the Organisation for Economic Cooperation and Development (OECD),(footnote 1) preliminary real GDP estimates in volume measures showed quarterly growth for: China (2.0%), USA (1.0%), UK (0.8%), Spain (0.6%), South Korea (0.6%), Sweden (0.2%), Belgium (0.1%) and Italy (-0.2%). Australia's international investment activities during the quarter were as follows:
The Australian share market, as measured by the MSCI Global Index,(footnote 2) was flat during the June quarter 2014, following an increase of 1.0% in the March quarter 2014. There were increases in the following markets: Hong Kong 6.6%, Canada 5.5%, Japan 4.7%, USA 4.7%, Singapore 3.2%, UK 2.3%, Switzerland 1.0%, France 0.6% and Germany 0.5%, with New Zealand decreasing 3.2%. A market price change of -$6.4b was recorded for portfolio foreign equity assets and -$0.6b for portfolio foreign equity liabilities in the June quarter 2014. According to Bloomberg,(footnote 3) the composite corporate benchmark yield decreased in Australia from 4.35% to 3.99%, UK from 3.69% to 3.59%, USA from 3.22% to 3.00%, Germany from 1.88% to 1.56% and Japan from 0.43% to 0.38%. The long term 10 year government bond yields decreased in all four major markets: USA from 2.73% to 2.53%, UK from 2.73% to 2.68%, Germany from 1.57% to 1.25% and Japan from 0.63% to 0.57%. In Australia, the rate decreased from 4.10% to 3.70%. Market price changes were recorded for portfolio debt securities assets of -$0.9b and liabilities of $3.6b in the June quarter 2014. The Australian dollar appreciated against a number of the major currencies in the June quarter 2014. It increased 6.7% against the Indonesian rupiah, 5.1% against the Swedish krona, 4.3% against the Norwegian krone, 3.3% against the Vietnamese dong, 3.0% against the Euro, 2.6% against the Swiss franc, 2.5% against the Indian rupee, 2.2% against the US dollar, 0.9% against the New Zealand dollar and 0.6% against the Japanese yen. The Australian dollar depreciated 3.1% against the South Korean won, 1.4% against the Canadian dollar and 0.2% against UK pound sterling. The Trade Weighted Index (TWI)(footnote 4) ,(footnote 5) recorded an increase of 1.4%. This is reflected in the exchange rate changes for foreign assets of $15.2b and foreign liabilities of -$9.8b in the June quarter 2014. RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6) In original terms, the IPD for total goods credits fell 9.7% and the chain Laspeyres price index for goods exports fell 7.6%. The Export Price Index (EPI)(footnote 7) fell 7.9% during the June quarter 2014. In original terms, the IPD for total goods debits fell 3.1% and the chain Laspeyres price index for goods imports fell 2.9%. The Import Price Index (IPI)(footnote 7) fell 3.0% during the June quarter 2014. 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(footnote 8) (average monthly index) for rural commodities increased 1.8% between the March and June quarter 2014 while the EPI for rural goods increased 0.8%. The RBA Commodity Price Index for non-rural commodities decreased 10.5% while the EPI for non-rural goods total (excluding non-monetary gold) decreased 9.7%. 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. FINANCIAL YEAR 2013-14 SITUATION CURRENT ACCOUNT In original terms, the balance on current account for 2013-14 was a deficit of $47.1b, a decrease of $13.3b (22%) on the deficit of $60.3b recorded for 2012-13. The balance on goods and services was a deficit of $6.2b, a decrease of $13.8b (69%) on the deficit of $20.0b recorded in 2012-13. Goods and services credits increased $30.3b (10%) and goods and services debits increased $16.5b (5%). The 2013-14 net primary income deficit increased $0.9b (2%), with an increase in primary income credits of $2.5b (5%) and an increase in primary income debits of $3.3b (4%). The 2013-14 net secondary income deficit decreased $0.3b (14%), with an increase in secondary income credits of $0.7b (9%) and an increase in secondary income debits of $0.4b (4%). FINANCIAL ACCOUNT The balance on financial account recorded a net inflow of $47.4b, with a net inflow on debt of $39.8b and a net inflow on equity of $7.5b. This result was down $12.5b on the net inflow of $59.8b recorded for the previous year as a result of:
INTERNATIONAL INVESTMENT POSITION Australia's net international investment position as at 30 June 2014 was a net foreign liability of $864.2b. This was up $35.7b (4%) on the position a year earlier as a result of:
During 2013-14, Australia's net foreign equity changed from a net liability position of $32.0b to a net asset position of $1.2b. This was a turnaround of $33.2b on the previous financial year, with price changes of -$25.5b and other changes of -$20.1b, partially offset by transactions of $7.5b and exchange rate changes of $4.8b. Australia's net foreign debt liability rose to $865.5b, up $68.9b (9%) on the previous financial year, with transactions of $39.8b, price changes of $18.8b, other changes of $7.6b and exchange rate changes of $2.6b. At 30 June 2014, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 31 March 2014 using current prices) was 55.0%. This compares with 54.4% one year ago. 1 OECD Statistics Quarterly National Account, Organisation for Economic Cooperation and Development – Economic Department, viewed 19 August 2014, <back 2 MSCI Global Market Indexes 2014, Morgan Stanley Capital International, viewed 2 July 2014, <back 3 Bloomberg, Blooming Corporate Services, viewed 7 July 2014 <back 4 Exchange Rates – Daily – 2014 to Current, Reserve Bank of Australia – Statistical Tables, viewed 2 July 2014, <back 5 Bloomberg, Blooming Corporate Services, viewed 7 July 2014 <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 8 For RBA Commodity Price Index methodology, see paragraph 23 of the Explanatory Notes <back Document Selection These documents will be presented in a new window.
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