5302.0 - Balance of Payments and International Investment Position, Australia, Mar 2015 Quality Declaration 
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS

In original current price terms, the March quarter 2015 current account deficit was $10,875m, a decrease of $828m (7%) on the December quarter 2014 deficit.

In original current price terms, the balance on goods and services contributed $3,055m, primary income contributed $7,158m and secondary income contributed $662m to the deficit.

The capital and financial account surplus was $10,852m, with the capital account contributing a net deficit of $133m and the financial account contributing $10,985m to the surplus.

BALANCE OF PAYMENTS, Summary: Original (a)

Mar 2014
Jun 2014
Sep 2014
Dec 2014
Mar 2015
$m
$m
$m
$m
$m

CURRENT ACCOUNT
-8 112
-10 726
-14 516
-11 703
-10 875
Goods and services
2 751
-2 491
-5 638
-4 547
-3 055
Credits
83 209
80 535
80 613
82 689
79 015
Debits
-80 458
-83 026
-86 251
-87 236
-82 070
Goods
5 077
577
-2 615
-2 745
-2 689
Credits
68 517
66 224
65 448
66 681
62 893
Debits
-63 440
-65 647
-68 063
-69 426
-65 582
Services
-2 326
-3 068
-3 023
-1 802
-366
Credits
14 692
14 311
15 165
16 008
16 122
Debits
-17 018
-17 379
-18 188
-17 810
-16 488
Primary income
-10 161
-7 628
-8 433
-6 692
-7 158
Credits
12 330
12 670
13 688
13 531
13 144
Debits
-22 491
-20 298
-22 121
-20 224
-20 302
Secondary income
-702
-607
-445
-464
-662
Credits
1 890
1 959
1 946
1 980
1 968
Debits
-2 592
-2 566
-2 391
-2 444
-2 630
CAPITAL AND FINANCIAL ACCOUNT
7 789
11 076
14 068
11 537
10 852
Capital account
-100
-71
-99
-129
-133
Acquisitions/disposals of non-produced non-financial assets
-
44
18
-2
-
Credits
-
48
21
-
-
Debits
-
-4
-3
-2
-
Capital transfers
-100
-115
-117
-127
-133
Credits
-
-
-
-
-
Debits
-100
-115
-117
-127
-133
Financial account
7 889
11 147
14 167
11 666
10 985
Direct investment
9 253
16 006
21 034
11 933
14 201
Assets
3 166
2 259
-135
-3 405
-228
Liabilities
6 087
13 746
21 169
15 338
14 429
Portfolio investment
3 859
9 610
-3 069
9 943
17 837
Assets
-12 383
-17 356
-15 190
-15 075
-13 591
Liabilities
16 242
26 966
12 121
25 018
31 428
Financial derivatives
210
-6 531
-6 822
-2 968
1 486
Assets
25 279
21 212
5 764
1 156
16 684
Liabilities
-25 068
-27 743
-12 586
-4 125
-15 198
Other investment
-1 384
-6 702
-715
-4 541
-16 906
Assets
-9 850
-21 553
7 399
5 912
-23 765
Liabilities
8 466
14 851
-8 114
-10 453
6 859
Reserve assets
-4 049
-1 235
3 739
-2 701
-5 633
NET ERRORS AND OMISSIONS
323
-351
448
166
23

- nil or rounded to zero (including null cells)
(a) For sign conventions, see paragraphs 15-17 of the Explanatory Notes.


In seasonally adjusted current price terms, the March quarter 2015 current account deficit was $10,741m, an increase of $502m (5%) on the December quarter 2014 deficit.

In trend current price terms, the March quarter 2015 current account deficit was $10,138m, a decrease of $978m (9%) on the December quarter 2014 deficit.

The contributors to the 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 - March Quarter 2015

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

Seasonally adjusted

Balance on current account
-10 741
-502
-4.9
Balance on goods and services
-3 701
-994
-36.7
Net goods
-2 235
-1 019
-83.8
Net services
-1 465
27
1.8
Net primary income
-6 525
434
6.2
Net secondary income
-515
58
10.1

Trend

Balance on current account
-10 138
978
8.8
Balance on goods and services
-3 083
462
13.0
Net goods
-1 882
-17
-0.9
Net services
-1 201
479
28.5
Net primary income
-6 520
504
7.2
Net secondary income
-535
12
2.2



TERMS OF TRADE(footnote 1)

Australia's seasonally adjusted terms of trade on net goods and services for the March quarter 2015 fell 2.9% to 85.7, with a decrease of 2.9% in the Implicit Price Deflator (IPD) for goods and services credits and the IPD for goods and services debits remaining steady at 108.3.

In trend terms, the terms of trade for net goods and services fell 1.9% to 86.3.

IMPLICIT PRICE DEFLATOR AND TERMS OF TRADE (a)
Graph: IMPLICIT PRICE DEFLATOR AND TERMS OF TRADE (a)



BALANCE ON GOODS AND SERVICES

In seasonally adjusted chain volume terms, the balance on goods and services was a surplus of $9,273m, a rise of $1,816m (24%) on the December quarter 2014 surplus of $7,457m.

The net surplus on goods rose $1,507m (20%) on the December quarter 2014 surplus of $7,385m. Goods credits rose $4,027m (6%) and goods debits rose $2,520m (4%). The net surplus on services rose $309m (429%) on the December quarter 2014 surplus of $72m.

The increase in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to contribute 0.5 percentage points to growth in the March quarter 2015 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the December quarter 2014.

GOODS AND SERVICES, CHAIN VOLUME MEASURES (a)
Graph: GOODS AND SERVICES, CHAIN VOLUME MEASURES (a)



GOODS

The trend estimate of net goods at current prices for the March quarter 2015 was a deficit of $1,882m, an increase of $17m (1%) on the December quarter 2014 deficit of $1,865m.

In seasonally adjusted terms at current prices, net goods was a deficit of $2,235m, an increase of $1,019m (84%) on the December quarter 2014 deficit of $1,216m.

GOODS, Price and volume analysis: Seasonally Adjusted - March Quarter 2015

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

Exports
1 345
2.1
5.8
-3.5
Rural goods
1 132
11.2
11.8
-0.6
Non-rural goods
-407
-0.8
4.1
-4.7
Net exports of goods under merchanting
-20
-16.4
-15.8
-0.6
Non-monetary gold
641
18.6
16.9
1.5
Imports
2 365
3.6
4.0
-0.5
Consumption goods
1 081
5.1
1.5
3.5
Capital goods
932
5.7
2.2
3.4
Intermediate and other merchandise goods
215
0.8
6.2
-5.1
Non-monetary gold
138
15.9
20.6
-3.9

(a) Reference year 2012-13.
(b) Movements in indexes are based on data to four decimal places.



Goods Credits

The trend estimate of goods credits at current prices rose $909m (1%) to $66,119m in the March quarter 2015.

In seasonally adjusted terms at current prices, goods credits rose $1,345m (2%) to $66,630m, with volumes up 6% and prices down 4%.


Rural Goods

Exports of rural goods, in seasonally adjusted terms at current prices, rose $1,132m (11%) to $11,262m, with volumes up 12% and prices down 1%. The main components contributing to the rise were:
  • other rural, up $757m (19%), with volumes up 21% and prices down 2%
  • cereal grains and cereal preparations, up $195m (9%), with volumes up 3% and prices up 6%
  • meat and meat preparations, up $167m (5%), with volumes up 9% and prices down 4%.


Non-rural Goods

Exports of non-rural goods, in seasonally adjusted terms at current prices, fell $407m (1%) to $51,187m, with volumes up 4% and prices down 5%. The main components contributing to the fall were:
  • metal ores and minerals, down $709m (3%), with volumes up 6% and prices down 9%
  • metals (excl. non-monetary gold), down $516m (16%), with volumes down 14% and prices down 2%.

Partly offsetting these falls was coal, coke and briquettes, up $879m (9%), with volumes up 6% and prices up 3%.

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 $20m (16%), with volumes down 16% and prices down 1%.


Non-monetary Gold

Non-monetary gold, in original and seasonally adjusted terms at current prices, rose $641m (19%), with volumes up 17% and prices up 1%.


Goods Debits

The trend estimate of goods debits at current prices rose $926m (1%) to $68,001m in the March quarter 2015.

In seasonally adjusted terms at current prices, goods debits rose $2,365m (4%) to $68,865m, with volumes up 4%.


Consumption Goods

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $1,081m (5%) to $22,172m, with volumes up 2% and prices up 3%. The main components contributing to the rise were:
  • textiles, clothing and footwear, up $491m (14%), with volumes up 7% and prices up 6%
  • consumption goods n.e.s., up $312m (5%), with volumes up 4% and prices up 1%
  • household electrical items, up $165m (13%), with volumes up 6% and prices up 6%.


Capital Goods

Imports of capital goods, in seasonally adjusted terms at current prices, rose $932m (6%) to $17,324m, with volumes up 2% and prices up 4%. The main components contributing to the rise were:
  • civil aircraft and confidentialised items, up $581m (40%), with volumes up 27% and prices up 10%
  • telecommunications equipment, up $209m (8%), with volumes up 3% and prices up 5%
  • capital goods n.e.s., up $183m (7%), with volumes up 10% and prices down 3%.


Intermediate and Other Merchandise Goods

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $215m (1%) to $28,366m, with volumes up 6% and prices down 5%. The main components contributing to the rise were:
  • processed industrial supplies n.e.s., up $1,103m (15%), with volumes up 10% and prices up 4%
  • other parts for capital goods, up $163m (4%), with prices up 4%
  • parts for transport equipment, up $155m (6%), with volumes up 3% and prices up 3%.

Partly offsetting these rises was fuels and lubricants, down $1,687m (19%), with volumes up 6% and prices down 24%.


Non-monetary Gold

Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, rose $138m (16%) to $1,004m, with volumes up 21% and prices down 4%.


SERVICES

The trend estimate of net services at current prices was a deficit of $1,201m, a decrease of $479m (29%) on the December quarter 2014 deficit of $1,680m.

In seasonally adjusted terms at current prices, net services was a deficit of $1,465m, a decrease of $27m (2%) on the December quarter 2014 deficit of $1,492m.

SERVICES, Price and volume analysis: Seasonally Adjusted - March Quarter 2015

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

Exports
218
1.4
1.2
0.2
Manufacturing services on physical inputs owned by others
5
500.0
500.6
-0.1
Maintenance and repair services n.i.e.
-2
-16.7
-16.6
-0.1
Transport
31
1.9
2.1
-0.2
Travel
218
2.4
2.0
0.3
Other services
-34
-0.7
-0.7
-
Imports
193
1.1
-0.9
2.0
Manufacturing services on physical inputs owned by others
-
-
-
-
Maintenance and repair services n.i.e.
91
123.0
111.7
5.3
Transport
14
0.3
6.4
-5.7
Travel
124
1.7
-2.7
4.6
Other services
-37
-0.6
-5.7
5.3

- nil or rounded to zero (including null cells)
(a) Reference year 2012-13.
(b) Movements in indexes are based on data to four decimal places.



Services Credits

Services credits, in seasonally adjusted terms at current prices, rose $218m (1%) to $15,953m, with volumes up 1%. The main component contributing to the rise was travel, up $218m (2%), with volumes up 2%.

In seasonally adjusted terms, tourism related service credits rose $235m (2%) to $10,092m.


Services Debits

Services debits, in seasonally adjusted terms at current prices, rose $193m (1%) to $17,419m, with volumes down 1% and prices up 2%. The main components contributing to the rise were:
  • travel, up $124m (2%), with volumes down 3% and prices up 5%
  • maintenance and repair services n.i.e., up $91m (123%), with volumes up 111% and prices up 5%.

Partly offsetting these rises was other services, down $37m (1%), with volumes down 6% and prices up 5%.

In seasonally adjusted terms, tourism related service debits rose $14m to $8,631m.


PRIMARY INCOME

The trend estimate of the net primary income deficit at current prices, fell $504m (7%) to $6,520m in the March quarter 2015.

The seasonally adjusted estimate of the net primary income deficit at current prices, fell $434m (6%) to $6,525m in the March quarter 2015.

NET PRIMARY INCOME
Graph: NET PRIMARY INCOME



Primary Income Credits

Primary income credits, in seasonally adjusted terms at current prices, fell $116m (1%) to $13,472m. The main component contributing to the fall was portfolio investment asset, interest, down $211m (11%).


Primary Income Debits

Primary income debits, in seasonally adjusted terms at current prices, fell $550m (3%) to $19,997m. The main component contributing to the fall was portfolio investment liabilities, interest, down $791m (14%).


SECONDARY INCOME

The trend estimate of the net secondary income deficit at current prices, fell $12m (2%) to $535m in the March quarter 2015.

In seasonally adjusted terms, the net secondary income deficit at current prices, fell $58m (10%) to $515m in the March quarter 2015.


CAPITAL ACCOUNT

The balance on the capital account, in original terms, recorded a net outflow of $133m, which was driven by an outflow of $133 in capital transfers in the March quarter 2015.


FINANCIAL ACCOUNT

The balance on the financial account, in original terms, recorded a net inflow of $11.0b, which was driven by a net inflow of equity of $9.6b and a net inflow of debt of $1.4b.

The financial account surplus decreased $0.7b to $11.0b in the March quarter 2015, from $11.7b in the December quarter 2014.


Direct Investment

Direct investment recorded a net inflow of $14.2b in the March quarter 2015, an increase of $2.3b from the net inflow of $11.9b in the December quarter 2014, where:
  • direct investment liabilities recorded an inflow of $14.4b, a decrease of $0.9b on the inflow of $15.3b in the December quarter 2014
  • direct investment assets recorded an outflow of $0.2b, a decrease of $3.2b on the outflow of $3.4b in the December quarter 2014.


Portfolio investment

Portfolio investment recorded a net inflow of $17.8b, an increase of $7.9b on the net inflow of $9.9b in the December quarter 2014, where:
  • debt securities recorded a net inflow of $12.0b, a decrease of $10.9b on the inflow of $22.9b in the December quarter 2014
  • equity and investment fund shares recorded a net inflow of $5.8b, a turnaround of $18.8b on the outflow of $13.0b in the December quarter 2014.


Financial derivatives

Financial derivatives recorded a net inflow of $1.5b, a turnaround of $4.5b on the net outflow of $3.0b in the December quarter 2014.


Other investment

Other investment recorded a net outflow of $16.9b, an increase of $12.4b on the net outflow of $4.5b in the December quarter 2014. This was driven by the net outflow in loans of $20.7b and partly offset by the net inflow in currency and deposits of $3.0b.


Reserve assets

Reserve assets recorded an outflow of $5.6b, an increase of $2.9b on the outflow of $2.7b in the December quarter 2014. This was driven by the RBA’s increase in short-term debt securities of $10.2b, partially offset by a decrease in currency and deposits of $4.6b.


INTERNATIONAL INVESTMENT POSITION (IIP)

Australia's net IIP liability position was $878.4b at 31 March 2015, an increase of $11.7b (1%) on the 31 December 2014 position of $866.7b. Australia's net foreign debt liability increased $27.6b (3%) to a net liability position of $954.7b. Australia's net foreign equity increased $15.9 (26%) to a net asset position of $76.3b at 31 March 2015.

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

INTERNATIONAL INVESTMENT POSITION, By Net Foreign Equity and Net Foreign Debt

CHANGES IN POSITION REFLECTING

Position at beginning of period
Transactions
Price changes
Exchange rate changes
Other adjustments
Position at end of period
$m
$m
$m
$m
$m
$m

Net International Investment Position

Sep 2014
866 607
14 167
5 649
-7 228
-3 847
875 348
Dec 2014
875 348
11 666
-2 332
-15 395
-2 578
866 708
Mar 2015
866 708
10 985
21 135
-16 773
-3 679
878 376

Net Foreign Equity
Sep 2014
-707
18 596
7 908
-32 765
-7 075
-14 042
Dec 2014
-14 042
-1 763
-6 190
-32 943
-5 451
-60 388
Mar 2015
-60 388
9 623
12 684
-32 333
-5 882
-76 296

Net Foreign Debt
Sep 2014
867 314
-4 430
-2 260
25 538
3 227
889 390
Dec 2014
889 390
13 429
3 858
17 548
2 873
927 097
Mar 2015
927 097
1 362
8 451
15 560
2 203
954 672


SUPPLEMENTARY INFORMATION

CONDITIONS

The conditions in the global economy showed modest growth for most countries in the March quarter 2015. According to the Organisation for Economic Cooperation and Development(footnote 2) , preliminary real GDP estimates in seasonally adjusted terms showed quarterly growth for China (1.3%), European Union (0.4%), UK (0.3%) and the USA (0.1%). Quarterly growth rates fell for Greece (-0.2%).

Australia's international investment activities during the quarter were as follows:
  • foreign asset transactions were -$26.5b in the March quarter 2015 compared to -$14.1b in the December quarter 2014
  • foreign liability transactions were $37.5b in the March quarter 2015 compared to $25.8b in the December quarter 2014.

The Australian share market, as measured by the MSCI global index(footnote 3), increased 9.0% in the March quarter 2015, following an increase of 2.1% in the December quarter 2014. There were increases in all major markets: Germany 21.7%, France 17.8%, Japan 9.5%, Hong Kong 5.3%, UK 2.9%, Canada 2.2%, Switzerland 1.6%, Singapore 1.3%, USA 0.9% and New Zealand 0.4%. A market price change of -$16.1b was recorded for foreign equity assets and $36.8b in foreign equity liabilities in the March quarter 2015.

According to Bloomberg(footnote 4) , the composite corporate benchmark yield decreased in Australia from 3.52% to 3.13%, UK from 2.99% to 2.65%, Germany from 1.17% to 0.99% and USA from 3.23% to 2.96%, but increased in Japan from 0.27% to 0.35%. The long-term 10 year government bond yields decreased in USA from 2.17% to 1.94%, UK from 1.76% to 1.58%, Germany from 0.54% to 0.27%, but increased in Japan from 0.33% to 0.40%. In Australia, the rate decreased from 2.96% to 2.48%. Market price changes were recorded for both portfolio debt securities assets of -$0.4b and liabilities of $6.2b in the March quarter 2015.

The Australian dollar depreciated against a number of the major currencies in the March quarter 2015. It decreased 8.8% against the Swiss franc, 7.9% against the Indian rupee, 7.0% against the Hong Kong dollar, 6.9% against the US dollar, 6.9% against the Chinese renminbi, 6.4% against the Japanese yen, 5.3% against the South Korean won, 3.1% against the Singapore dollar, 2.6% against the New Zealand dollar, 2.0% against the Indonesian rupiah, 2.0% against the UK pound sterling and 1.1% against Malaysian ringgit. The Australian dollar appreciated 5.2% against Danish krone, 4.8% against the European euro, 1.8% against the Canadian dollar and 0.7% against the Norwegian krone. The Trade Weighted Index (TWI) (footnote 4),(footnote 5) recorded a decrease of 4.8%. This is reflected in exchange rate changes for foreign assets of -$46.9b and foreign liabilities of $30.1b.


RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6)

In original terms, the IPD for total goods credits fell 1.6% and the chain Laspeyres price index for goods exports fell 1.4%. The Export Price Index (EPI)(footnote 7) fell 0.8% during the March quarter 2015.

In original terms, the IPD for total goods debits fell 0.6% and the chain Laspeyres price index for goods imports fell 0.1%. The Import Price Index (IPI) (footnote 7) fell 0.2% during the March quarter 2015.

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.

GOODS AND SERVICES, Price comparison - March Quarter 2015

Change in:
Seasonally adjusted
Original
Implicit price deflators (a)
Implicit price deflators (a)
International trade price indexes (b)
Chain Laspeyres price indexes (a)
%
%
%
%

Exports
Goods
-3.5
-1.6
-0.8
-1.4
Services
0.2
0.2
na
0.2
Imports
Goods
-0.5
-0.6
-0.2
-0.1
Services
2.0
2.0
na
2.5

na not available
(a) Reference year 2012-13 = 100.
(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 (average monthly index) for rural commodities increased 1.1% between the December quarter 2014 and March quarter 2015 while the EPI for rural goods increased 1.0%.

The RBA Commodity Price Index for non-rural commodities increased 0.6% while the EPI for non-rural goods total (excluding non-monetary gold) decreased 1.6%.

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.

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 May 2015. <back
3 MSCI Global Market Indexes 2015, Morgan Stanley Capital International, viewed 7 April 2015. <back
4 Bloomberg, Bloomberg Professional Service, viewed 10 April 2015. <back
5 Exchange Rates – Daily 2015 to Current, Reserve Bank of Australia - Statistical Tables, viewed 7 April 2015. <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