ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS

In original current price terms, the March quarter 2019 current account deficit was $1,096m, a fall of $5,433m on the December quarter 2018 deficit. In original current price terms, the balance on goods and services was a net surplus of $15,942m, primary income was a net deficit of $16,277m and secondary income was a net deficit of $761m.

In original current price terms, the March quarter 2019 capital and financial account surplus was $812m, a fall of $7,708m on the December quarter 2018 surplus. In original current price terms, the capital account was a net deficit of $190m and the financial account was a net surplus of $1,002m.

The contributors to the current account balances, in original terms at current prices, are shown in the following table.

BALANCE OF PAYMENTS, Summary(a): Original
					Mar 2018	Jun 2018	Sep 2018	Dec 2018	Mar 2019
					$m	$m	$m	$m	$m
CURRENT ACCOUNT					-9 167	-10 599	-12 507	-6 529	-1 096
	Goods and services				5 854	3 474	5 558	8 250	15 942
		Credits			102 658	105 581	111 914	117 974	116 411
		Debits			-96 804	-102 107	-106 356	-109 724	-100 469
			Goods		4 217	6 059	8 680	9 178	13 636
				Credits	78 381	84 557	89 043	93 361	90 114
				Debits	-74 164	-78 498	-80 363	-84 183	-76 478
			Services		1 637	-2 585	-3 122	-928	2 306
				Credits	24 277	21 024	22 871	24 613	26 297
				Debits	-22 640	-23 609	-25 993	-25 541	-23 991
	Primary income				-14 624	-13 560	-17 769	-14 852	-16 277
		Credits			14 687	16 100	16 446	17 721	18 269
		Debits			-29 311	-29 660	-34 215	-32 573	-34 546
	Secondary income				-397	-513	-296	73	-761
		Credits			2 253	2 327	2 334	2 363	2 328
		Debits			-2 650	-2 840	-2 630	-2 290	-3 089
CAPITAL AND FINANCIAL ACCOUNT					9 753	13 559	14 004	8 520	812
	Capital account				-20	-134	-175	-162	-190
		Acquisitions/disposals of non-produced non-financial assets			123	32	3	33	13
			Credits		125	80	3	63	14
			Debits		-2	-48	-	-30	-1
		Capital transfers			-143	-166	-178	-195	-203
			Credits		-	-	-	-	-
			Debits		-143	-166	-178	-195	-203
	Financial account				9 773	13 693	14 179	8 682	1 002
		Direct investment			14 616	26 713	4 314	33 204	807
			Assets		-494	-7 675	-10 042	15 736	-6 690
			Liabilities		15 110	34 388	14 356	17 468	7 497
		Portfolio investment			6 988	803	-16 108	-7 561	-20 078
			Assets		-30 572	-21 897	-3 988	-23 713	-9 631
			Liabilities		37 560	22 700	-12 121	16 151	-10 447
		Financial derivatives			5 318	-4 845	-837	-5 549	-776
			Assets		20 841	20 928	29 731	10 375	18 084
			Liabilities		-15 523	-25 773	-30 568	-15 924	-18 860
		Other investment			-27 572	-10 266	25 495	-12 736	22 896
			Assets		-26 746	-2 844	27 927	-4 793	18 254
			Liabilities		-825	-7 422	-2 432	-7 943	4 642
		Reserve assets			10 423	1 289	1 315	1 324	-1 846
NET ERRORS AND OMISSIONS					-586	-2 960	-1 498	-1 991	284
- 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 2019 current account deficit was $2,900m, a fall of $3,425m on the December quarter 2018 deficit.

In trend current price terms, the March quarter 2019 current account deficit was $2,006m, a fall of $4,190m on the December 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.

BALANCE ON CURRENT ACCOUNT IN CURRENT PRICES - March Quarter 2019
				Change in:
			Current prices	Current prices	Current prices
			$m	$m	%
Seasonally Adjusted
Balance on current account			-2 900	3 425	54.2
	Balance on goods and services		13 594	4 753	53.8
		Net goods	14 332	4 200	41.5
		Net services	-738	553	42.8
	Net primary income		-15 984	-1 192	-8.1
	Net secondary income		-510	-136	-36.4
Trend
Balance on current account			-2 006	4 190	67.6
	Balance on goods and services		13 846	4 020	40.9
		Net goods	14 793	3 866	35.4
		Net services	-947	154	14.0
	Net primary income		-15 384	220	1.4
	Net secondary income		-467	-48	-11.5

TERMS OF TRADE(footnote 1)

Australia's seasonally adjusted terms of trade on net goods and services for the March quarter 2019 rose 3.1% to 110.0, with an increase of 2.7% in the implicit price deflator (IPD) for goods and services credits and a decrease of 0.4% in the IPD for goods and services debits.

In trend terms, the terms of trade for net goods and services rose 3.2% to 110.4.

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 $2,597m, a rise of $1,069m on the December quarter 2018 surplus of $1,527m.

The net surplus on goods rose $282m on the December quarter 2018 surplus of $1,760m. Goods credits rose $522m (1%) and goods debits rose $240m. The net surplus on services was a turnaround of $787m on the December quarter 2018 deficit of $232m.

The rise in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to contribute 0.2 percentage points to growth in the March quarter 2019 chain volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the December quarter 2018.

GOODS AND SERVICES, CHAIN VOLUME MEASURES (a)



Goods

The trend estimate of net goods at current prices for the March quarter 2019 was a surplus of $14,793m, a rise of $3,866m on the December quarter 2018 surplus of $10,927m.

In seasonally adjusted terms at current prices, net goods was a surplus of $14,332m, a rise of $4,200m on the December quarter 2018 surplus of $10,132m.

GOODS, Price and volume analysis: Seasonally adjusted - March Quarter 2019
	Change in:
	Current prices	Current prices	Chain volume measures(a)	Implicit price deflators(a)(b)
	$m	%	%	%
Exports	3 695	4.1	0.7	3.4
Rural goods	816	7.0	6.5	0.5
Non-rural goods	1 098	1.5	-2.5	4.1
Net exports of goods under merchanting	-37	-54.4	-58.7	10.3
Non-monetary gold	1 818	48.4	39.2	6.6
Imports	-505	-0.6	0.3	-0.9
Consumption goods	598	2.3	3.0	-0.6
Capital goods	371	1.9	1.2	0.7
Intermediate and other merchandise goods	-1 605	-4.7	-2.7	-2.0
Non-monetary gold	131	10.9	3.8	6.8
(a) Reference year 2016-17.
(b) Movements in indexes are based on data to four decimal places.

GOODS CREDITS

The trend estimate of goods credits at current prices rose $3,962m (4%) to $95,299m in the March quarter 2019.

In seasonally adjusted terms at current prices, goods credits rose $3,695m (4%) to $94,548m, with volumes up 1% and prices up 3%.


Rural Goods

Exports of rural goods, in seasonally adjusted terms at current prices, rose $816m (7%) to $12,499m, with volumes up 6%.

The main components contributing to the rise were:

• meat and meat preparations, up $412m (12%), with volumes up 15% and prices down 2%
• other rural, up $323m (6%), with volumes up 3% and prices up 3%
• wool and sheepskins, up $139m (14%), with volumes up 15% and prices down 1%.

Partly offsetting these rises was cereal grains and cereal preparations, down $58m (3%), with volumes down 7% and prices up 4%.


Non-rural Goods

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $1,098m (1%) to $76,443m, with volumes down 3% and prices up 4%.

The main components contributing to the rise were:

• metal ores and minerals, up $1,692m (7%), with volumes down 5% and prices up 12%
• machinery, up $182m (7%), with volumes up 6% and prices up 1%
• other manufactures, up $126m (2%), with volumes up 2%.

Partly offsetting these rises were:

• other mineral fuels, down $360m (2%), with volumes down 1% and prices down 1%
• transport equipment, down $312m (21%), with volumes down 22% and prices up 1%
• metals (excl. non-monetary gold), down $130m (4%), with volumes down 6% and prices up 3%.

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 $37m (54%) to $31m, with volumes down 59% and prices up 10%.


Non-monetary Gold

Exports of non-monetary gold, in original and seasonally adjusted terms at current prices, rose $1,818m (48%) to $5,575m, with volumes up 39% and prices up 7%.


GOODS DEBITS

The trend estimate of goods debits at current prices rose $95m to $80,505m in the March quarter 2019.

In seasonally adjusted terms at current prices, goods debits fell $505m (1%) to $80,216m, with prices down 1%.


Consumption Goods

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $598m (2%) to $26,493m, with volumes up 3% and prices down 1%.

The main components contributing to the rise were:

• non-industrial transport equipment, up $439m (8%), with volumes up 8%
• consumption goods n.e.s., up $226m (3%), with volumes up 5% and prices down 2%
• food and beverages, mainly for consumption, up $108m (3%), with volumes up 3%.

Partly offsetting these rises was textiles, clothing and footwear, down $165m (4%), with volumes down 4%.


Capital Goods

Imports of capital goods, in seasonally adjusted terms at current prices, rose $371m (2%) to $19,828m, with volumes up 1% and prices up 1%.

The main components contributing to the rise were:

• industrial transport equipment n.e.s., up $764m (25%), with volumes up 25%
• machinery and industrial equipment, up $359m (6%), with volumes up 4% and prices up 2%
• capital goods n.e.s., up $161m (8%), with volumes up 8%.

Partly offsetting these rises were:

• civil aircraft and confidentialised items, down $566m (35%), with volumes down 36% and prices up 2%
• telecommunications equipment, down $252m (7%), with volumes down 7%.

Intermediate and Other Merchandise Goods

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, fell $1,605m (5%) to $32,562m, with volumes down 3% and prices down 2%.

The main components contributing to the fall were:

• fuels and lubricants, down $1,389m (13%), with volumes down 7% and prices down 7%
• processed industrial supplies n.e.s., down $142m (1%), with volumes down 2%.

Non-monetary Gold

Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, rose $131m (11%) to $1,333m, with volumes up 4% and prices up 7%.


SERVICES

The trend estimate of net services at current prices was a deficit of $947m, a fall of $154m on the December quarter 2018 deficit of $1,101m.

In seasonally adjusted terms at current prices, net services was a deficit of $738m, a fall of $553m on the December quarter 2018 deficit of $1,291m.

SERVICES, Price and volume analysis: Seasonally adjusted - March Quarter 2019
	Change in:
	Current prices	Current prices	Chain volume measures(a)	Implicit price deflators(a)(b)
	$m	%	%	%
Exports	544	2.3	2.0	0.3
Manufacturing services on physical inputs owned by others	-	-	-	-
Maintenance and repair services n.i.e.	1	7.1	7.0	0.2
Transport	-8	-0.4	-0.1	-0.4
Travel	369	2.4	1.9	0.4
Other services	180	2.8	2.7	0.2
Imports	-9	-	-1.4	1.4
Manufacturing services on physical inputs owned by others	-	-	-	-
Maintenance and repair services n.i.e.	-19	-8.5	-9.9	1.5
Transport	21	0.5	1.3	-0.8
Travel	-56	-0.4	-2.5	2.1
Other services	44	0.6	-1.0	1.6
- nil or rounded to zero (including null cells)
(a) Reference year 2016-17.
(b) Movements in indexes are based on data to four decimal places.

Services Credits

Services credits, in seasonally adjusted terms at current prices, rose $544m (2%) to $24,410m, with volumes up 2%.

The main components contributing to the rise were:

• travel, up $369m (2%), with volumes up 2%
• other services, up $180m (3%), with volumes up 3%.

In seasonally adjusted terms, tourism related services credits rose $346m (2%) to $16,736m.


Services Debits

Services debits, in seasonally adjusted terms at current prices, fell $9m to $25,148m, with volumes down 1% and prices up 1%.

The main component contributing to the fall was travel, down $56m, with volumes down 3% and prices up 2%.

Partly offsetting this fall was other services, up $44m (1%), with volumes down 1% and prices up 2%.

In seasonally adjusted terms, tourism related services debits rose $2m to $14,458m.


PRIMARY INCOME

The trend estimate of the net primary income deficit at current prices fell $220m to $15,384m in the March quarter 2019.

In seasonally adjusted terms at current prices, the net primary income deficit rose $1,192m to $15,984m in the March quarter 2019.

NET PRIMARY INCOME



Primary Income Credits

Primary income credits, in seasonally adjusted terms at current prices, rose $1,234m (7%) to $18,611m. The main component of investment income contributing to the rise was direct investment assets, income on equity and investment fund shares, up $948m (16%).


Primary Income Debits

Primary income debits, in seasonally adjusted terms at current prices, rose $2,427m (8%) to $34,596m. The main component of investment income contributing to the rise was direct investment liabilities, income on equity and investment fund shares, up $2,493m (18%).


SECONDARY INCOME

The trend estimate of the net secondary income deficit at current prices rose $48m to $467m in the March quarter 2019.

In seasonally adjusted terms at current prices, the net secondary income deficit rose $136m to $510m in the March quarter 2019.


CAPITAL ACCOUNT

In original terms, the capital account deficit was $190m, an increase of $28m on the December quarter 2018 deficit of $162m. Capital account credits decreased $49m (78%) and capital account debits decreased $21m (9%) in the March quarter 2019.


FINANCIAL ACCOUNT

The balance on the financial account, in original terms, recorded a net inflow of $1.0b, which was driven by a net inflow of equity of $9.0b and a net outflow of debt of $8.0b.

The financial account surplus decreased $7.7b from $8.7b in the December quarter 2018, to $1.0b in the March quarter 2019.


Direct Investment

Direct investment recorded a net inflow of $0.8b in the March quarter 2019, a decrease of $32.4b on the net inflow of $33.2b in the December quarter 2018, where:

• direct investment liabilities recorded an inflow of $7.5b, a decrease of $10.0b (57%) on the inflow of $17.5b in the December quarter 2018
• direct investment assets recorded an outflow of $6.7b, a turnaround of $22.4b on the inflow of $15.7b in the December quarter 2018.

Portfolio Investment

Portfolio investment recorded a net outflow of $20.1b in the March quarter 2019, an increase of $12.5b on the net outflow of $7.6b in the December quarter 2018, where:

• equity and investment fund shares recorded a net inflow of $3.0b in the March quarter 2019, a turnaround of $43.6b on the net outflow of $40.6b in the December quarter 2018
• debt securities recorded a net outflow of $23.1b in the March quarter 2019, a turnaround of $56.1b on the net inflow of $33.0b in the December quarter 2018.

Financial Derivatives

Financial derivatives recorded a net outflow of $0.8b in the March quarter 2019, a decrease of $4.8b on the net outflow of $5.5b in the December quarter 2018.


Other Investment

Other investment recorded a net inflow of $22.9b in the March quarter 2019, a turnaround of $35.6b on the net outflow of $12.7b in the December quarter 2018. This was driven by a net inflow of $24.8b in loans and a net outflow of $6.4b in currency and deposits.


Reserve Assets

Reserve assets recorded an outflow of $1.8b in the March quarter 2019, a turnaround of $3.2b on the inflow of $1.3b in the December quarter 2018.


INTERNATIONAL INVESTMENT POSITION (IIP)

Australia's net IIP liability position was $966.1b at 31 March 2019, a decrease of $31.8b on the revised 31 December 2018 position of $998.0b. Australia's net foreign debt liability position increased $5.0b to $1,099.5b. Australia's net foreign equity asset position increased $36.8b to $133.3b at 31 March 2019.

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 2018	955 663	14 179	-11 129	-4 335	-4 548	949 830
	Dec 2018	949 830	8 682	45 443	-3 317	-2 666	997 972
	Mar 2019	997 972	1 002	-31 121	3 583	-5 290	966 146
Net Foreign Equity
	Sep 2018	-75 039	9 944	-9 396	-16 408	-8 616	-99 515
	Dec 2018	-99 515	-11 345	36 563	-17 424	-4 825	-96 546
	Mar 2019	-96 546	9 023	-42 523	3 342	-6 627	-133 331
Net Foreign Debt
	Sep 2018	1 030 703	4 235	-1 733	12 073	4 068	1 049 345
	Dec 2018	1 049 345	20 027	8 881	14 106	2 159	1 094 519
	Mar 2019	1 094 519	-8 021	11 401	241	1 337	1 099 476

SUPPLEMENTARY INFORMATION

CONDITIONS

The conditions in the global economy showed moderate growth in most of Australia’s major trading partner countries in the March quarter 2019. 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 (1.4%), Indonesia (1.2%), the USA (0.8%), Spain (0.7%), the UK (0.5%), the Euro 28 (0.5%), Germany (0.4%), France (0.3%), Belgium (0.2%) and a fall for South Korea (-0.3%).

• foreign asset transactions were $18.2b in the March quarter 2019 compared to -$1.1b in the December quarter 2018
• foreign liability transactions were -$17.2b in the March quarter 2019 compared to $9.8b in the December quarter 2018.

The Australian share market, as measured by the MSCI global index(footnote 3) increased 8.4% in the March quarter 2019, a turnaround from a decrease of 8.4% in the December quarter 2018. Increases were recorded in China (17.8%), Hong Kong (15.3%), Switzerland (13.5%), New Zealand (13.5%), the USA (13.3%), France (12.5%), Canada (12.2%), Germany (8.3%), the UK (7.8%), Brazil (7.5%), Japan (6.6%), India (6.0%), Singapore (5.4%) and Indonesia (3.3%). There was a decrease recorded for Malaysia (1.9%). A market price change of -$81.4b was recorded for foreign equity assets and $38.9b for foreign equity liabilities in the March quarter 2019.
According to Thomson Reuters(footnote 4), the composite corporate benchmark yields decreased in the USA from 4.26% to 3.68%, Germany from 1.33% to 0.90%, the UK from 2.74% to 2.33% and Japan from 0.37% to 0.35% over the March quarter 2019. The long-term 10 year government bond yields decreased in Germany from 0.25% to -0.07%, the USA from 2.69% to 2.41%, the UK from 1.28% to 1.00% and Japan from 0.00% to -0.09% over the March quarter 2019. A market price change of -$2.2b was recorded for portfolio debt securities assets and $14.4b in portfolio debt securities liabilities in the March quarter 2019.

The Australian dollar saw mixed movement against major currencies in the March quarter 2019. The Australian dollar depreciated 2.53% against the UK pound sterling, 1.83% against the Chinese renminbi, 1.19% against the Indonesian rupiah, 1.01% against the Canadian dollar, 0.77% against the Indian rupee, 0.73% against the New Zealand dollar and 0.29% against the Singapore dollar. The Australian dollar appreciated 2.74% against the South Korean won, 2.14% against the Euro, 1.66% against the South African rand, 1.47% against the Swiss franc, 0.93% against the Hong Kong dollar, 0.72% against the Japanese yen, 0.52% against the Norwegian krone and 0.41% against the US dollar. The Trade Weighted Index (TWI)(footnote 5) fell 0.33% to 60.5 in the March quarter 2019. These movements were reflected in exchange rate changes for foreign assets of $10.0b and foreign liabilities of -$6.4b in the March quarter 2019.


RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6)

In original terms, the IPD for total goods credits rose 3.8% and the chain Laspeyres price index for goods exports rose 4.2%. The Export Price Index (EPI)(footnote 7) rose 4.5% during the March quarter 2019.

In original terms, the IPD for total goods debits fell 0.4% and the chain Laspeyres price index for goods imports fell 0.6%. The Import Price Index (IPI)(footnote 7) fell 0.5% during the March quarter 2019.

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 2019
		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	3.4	3.8	4.5	4.2
	Services	0.3	0.3	na	0.3
Imports
	Goods	-0.9	-0.4	-0.5	-0.6
	Services	1.4	1.4	na	1.4
na not available
(a) Reference year 2016-17 = 100.
(b) Source: International Trade Price Indexes, Australia (cat. no. 6457.0).

IMPLICIT PRICE DEFLATORS AND INTERNATIONAL TRADE PRICE INDEXES



Commodity Price Indexes

The RBA Commodity Price Index (average monthly index) for rural commodities rose 1.6% between the December quarter 2018 and the March quarter 2019 while the EPI for rural goods rose 1.7%.

The RBA Commodity Price Index for non-rural commodities rose 4.4% between the December quarter 2018 and the March quarter 2019 while the EPI for non-rural goods (excluding non-monetary gold) rose 4.9%.

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 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 23 May 2019. <back
3 MSCI Global Market Indexes 2018, Morgan Stanley Capital International, viewed 03 April 2019. <back
4 Thomson Reuters, viewed 03 April 2019. <back
5 Exchange Rates – Daily 2014 to Current, Reserve Bank of Australia - Statistical Tables, viewed 03 April 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