5302.0 - Balance of Payments and International Investment Position, Australia, Mar 2014 
Quality Declaration
Quality Declaration ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 03/06/2014
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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 $15,118m, a rise of $5,315m (54%) on the December quarter 2013 surplus of $9,803m. The net surplus on goods rose $4,395m (36%) on the December quarter 2013 surplus of $12,342m. Goods credits rose $3,927m (5%) and goods debits fell $468m (1%). The net deficit on services fell $920m (36%) on the December quarter 2013 deficit of $2,539m. The increase in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to contribute 1.4 percentage points to growth in the March quarter 2014 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the December quarter 2013. Terms of Trade and Implicit Price Deflator Australia's seasonally adjusted terms of trade on net goods and services for the March quarter 2014 fell 1.2% to 87.1 with an increase of 1.2% in the implicit price deflator (IPD) for goods and services credits and an increase of 2.4% in the IPD for goods and services debits. In trend terms, the terms of trade for net goods and services fell 0.6% to 87.3. Goods The trend estimate of net goods at current prices for the March quarter 2014 was a surplus of $5,767m, a rise of $2,294m (66%) on the December quarter 2013 surplus of $3,473m. In seasonally adjusted terms at current prices, net goods was a surplus of $6,683m, a rise of $3,691m (123%) on the December quarter 2013 surplus of $2,992m.
Services
GOODS CREDITS The trend estimate of goods credits at current prices rose $2,703m (4%) to $72,522m in the March quarter 2014. In seasonally adjusted terms at current prices, goods credits rose $4,664m (7%) to $73,556m, with volumes up 5% and prices up 1%. Rural Goods Exports of rural goods, in seasonally adjusted terms at current prices, rose $1,144m (12%) to $10,881m, with volumes up 7% and prices up 4%. The main components contributing to the rise were:
Partly offsetting these rises was the wool and sheepskins component, down $74m (10%), with volumes down 12% and prices up 3%. Non-rural Goods Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $3,389m (6%) to $58,793m, with volumes up 5% and prices up 1%. 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, fell $8m (15%), with volumes down 17% and prices up 3%. Non-monetary Gold Non-monetary gold, in original and seasonally adjusted terms at current prices, rose $139m (4%), with volumes down 1% and prices up 4%. GOODS DEBITS The trend estimate of goods debits at current prices rose $409m (1%) to $66,755m in the March quarter 2014. In seasonally adjusted terms at current prices, goods debits rose $972m (1%) to $66,873m, with volumes down 1% and prices up 2%. Consumption Goods Imports of consumption goods, in seasonally adjusted terms at current prices, rose $670m (3%) to $20,915m, with volumes up 1% and prices up 2%. The main components contributing to the rise were:
Capital Goods Imports of capital goods, in seasonally adjusted terms at current prices, fell $896m (6%) to $14,889m with volumes down 8% and prices up 3%. The main component contributing to the fall was capital goods n.e.s., down $1,380m (46%), with volumes down 49% and prices up 6%. Partly offsetting this fall was the machinery and industrial equipment component, up $586m (12%), with volumes up 9% and prices up 3%. Intermediate and Other Merchandise Goods Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $1,302m (5%) to $30,142m, with volumes up 3% and prices up 2%. 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 $104m (10%) to $927m, with volumes down 15% and prices up 5%. SERVICES The trend estimate of net services at current prices was a deficit of $3,179m, a fall of $285m (8%) on the December quarter 2013 deficit of $3,464m. In seasonally adjusted terms at current prices, net services was a deficit of $3,092m, a fall of $508m (14%) on the December quarter 2013 deficit of $3,600m. Services Credits Services credits, in seasonally adjusted terms at current prices, rose $295m (2%) to $14,568m with volumes up 2%. The main components contributing to the rise were:
In seasonally adjusted terms, tourism related service credits rose $172m (2%) to $9,105m. Services Debits Services debits, in seasonally adjusted terms at current prices, fell $213m (1%) to $17,660m, with volumes down 4% and prices up 3%. The main components contributing to the fall were:
In seasonally adjusted terms, tourism related service debits fell $184m (2%) to $9,069m. PRIMARY INCOME The trend estimate of the net primary income deficit at current prices fell $232m (2%) to $9,622m in the March quarter 2014. The seasonally adjusted estimate of the net primary income deficit at current prices fell $1,811m (17%) to $8,781m in the March quarter 2014. Primary Income Credits Primary income credits, in seasonally adjusted terms at current prices, rose $1,077m (9%) to $13,419m. The main component contributing to the rise was direct investment assets, income on equity and investment fund shares, up $1,007m (21%). Primary Income Debits Primary income debits, in seasonally adjusted terms at current prices, fell $734m (3%) to $22,200m. The main component contributing to the fall was portfolio investment liabilities, investment income on equity and investment fund shares, down $734m (18%). SECONDARY INCOME The trend estimate of the net secondary income deficit at current prices, fell $8m (2%) to $489m in the March quarter 2014. In seasonally adjusted terms, the net secondary income deficit at current prices, fell $24m (5%) to $482m in the March quarter 2014. FINANCIAL ACCOUNT The balance on financial account, in original terms, recorded a net inflow of $4.9b, which was driven by a net inflow of debt of $2.7b and net inflow of equity of $2.3b. The financial account surplus decreased $8.8b to $4.9b in the March quarter 2014, from $13.7b in the December quarter 2013. Direct investment recorded a net inflow of $4.4b in the March quarter 2014, a decrease of $11.6b from the net inflow of $16.0b in the December quarter 2013, where:
Portfolio investment recorded a net inflow of $7.4b, a decrease of $1.3b on the net inflow of $8.7b in the December quarter 2013, where:
Financial derivatives recorded a net outflow of $0.8b, a decrease of $10.3b from the net outflow of $11.0b in the December quarter 2013. Other investment recorded a net outflow of $2.0b, a turnaround of $7.1b from the net inflow of $5.1b in the December quarter 2013, where:
Reserve assets recorded a net outflow of $4.0b, a decrease of $1.0b on the net outflow of $5.0b in the December quarter 2013. INTERNATIONAL INVESTMENT POSITION ANALYSIS Australia's net international investment position at 31 March 2014 was a net foreign liability of $850.4b, up $11.9b on the 31 December 2013 position of $838.5b. The changes contributing to this result are shown in the following table.
SUPPLEMENTARY INFORMATION CONDITIONS The conditions in the global economy showed modest improvements for most countries in the March quarter 2014. According to the Organisation for Economic Cooperation and Development (OECD)(footnote 1) , preliminary real GDP estimates in seasonally adjusted terms showed movement in quarterly growth for: Japan (1.5%), China (1.4%), Korea (0.9%), UK (0.8%), Germany (0.8%), Spain (0.4%), France (0.0%), USA (0.0%), Italy (-0.1%) and Netherlands (-1.4%). Australia's international investment activities during the quarter were as follows:
The Australian share market, as measured by the MSCI global index(footnote 2) , increased 1.0% in the March quarter 2014, following an increase of 2.7% in the December quarter 2013. There were increases in the following markets: New Zealand 8.9%, Canada 4.9%, Switzerland 3.2%, Europe (excluding UK) 3.1%, France 2.8% and USA 1.3%. Decreases were recorded for: Japan 8.2%, Hong Kong 3.8%, UK 2.5%, Singapore 1.5% and Germany 0.6%. A market price change of $1.1b was recorded for portfolio foreign equity assets and $3.2b in portfolio foreign equity liabilities in the March quarter 2014. According to Bloomberg(footnote 3) , the composite corporate benchmark yield decreased in Australia from 4.42% to 4.35%, UK from 3.85% to 3.69%, USA from 3.37% to 3.22%, Germany from 2.13% to 1.88% and in Japan from 0.49% to 0.43%. The long term 10 year government bond yields decreased in all four major markets: USA from 3.04% to 2.73%, UK from 3.04% to 2.73%, Germany from 1.94% to 1.57% and Japan from 0.74% to 0.63%. In Australia, the rate decreased from 4.24% to 4.10%. Market price changes were recorded for portfolio debt securities assets of $0.6b and liabilities of -$0.5b in the March quarter 2014, reflecting an increase in period average yields. The Australian dollar appreciated against a number of the major currencies in the March quarter 2014. It increased 7.1% against the Canadian dollar, 6.0% against the Chinese renminbi, 5.1% against the New Taiwan dollar, 4.8% against the South African rand, 4.7% against the South Korean won, 3.8% against the Danish krone, 3.4% against the Euro, 3.1% against the Hong Kong dollar, 3.1% against the US dollar, 3.0% against the Swiss franc, 2.8% against the Singapore dollar, 2.1% against the UK pound sterling and 0.9% against the Japanese yen. The Australian dollar depreciated 3.9% against the Indonesian rupiah, 2.0% against the New Zealand dollar and 0.3% against the Indian rupee. The Trade Weighted Index (TWI)(footnote 4) ,(footnote 5) recorded an increase of 3.1%. This is reflected in the exchange rate changes for foreign assets of $25.1b and foreign liabilities of -$25.4b in the March quarter 2014. RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6) 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 original terms, the IPD for total goods credits rose 3.1% and the chain Laspeyres price index for goods exports rose 3.6%. The export price index (EPI)(footnote 7) rose 3.6% during the March quarter 2014. The IPD in original terms for the metal ores and minerals goods credit component fell 0.10% between the December quarter 2013 and the March quarter 2014, while the EPI for the metal ores and minerals goods credit component rose 2.91%. The estimate of the IPD includes information not available at the time of compiling the EPI, including the negative $900m iron ore value adjustment applied to the March quarter 2014 (see the Value adjustments section for details). The EPI for the March quarter 2014 will be revised with the June quarter 2014 issue of International Trade Price Indexes, Australia (cat. no. 6457.0) on 31 July 2014. In original terms, the IPD for total goods debits rose 2.8% and the chain Laspeyres price index for goods imports rose 3.0%. The import price index (IPI)(footnote 7) rose 3.2% during the March quarter 2014.
Commodity Price Indexes The RBA Commodity Price Index(footnote 8) (average monthly index) for rural commodities increased 2.5% between the December quarter 2013 and March quarter 2014 while the EPI for rural goods increased 2.3%. The RBA Commodity Price Index for non-rural commodities increased 2.6% while the EPI for non-rural goods total (excluding non-monetary gold) increased 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. FOOTNOTES 1 OECD Statistics Quarterly National Account, Organisation for Economic Cooperation and Development – Economic Department, viewed 21 May 2014 ttp://stats.oecd.org/> <back 2 MSCI Global Market Indexes 2014, Morgan Stanley Capital International, viewed 1 April 2014, ttp://www.msci.com/products/indexes/performance.html> <back 3 Bloomberg, Blooming Corporate Services, viewed 8 April 2014 <back 4 Exchange Rates – Daily – 2010 to 2013, Reserve Bank of Australia – Statistical Tables, viewed 8 April 2014, ttp://www.rba.gov.au/statistics/tables/index.html/> <back 5 Bloomberg, Blooming Corporate Services, viewed 8 April 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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