5302.0 - Balance of Payments and International Investment Position, Australia, Sep 2013 Quality Declaration 
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

In original current price terms, the September quarter 2013 current account deficit was $14,398m, an increase of $6,326m (78%) on the June quarter 2013 deficit.

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 - September Quarter 2013

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

Seasonally Adjusted

Balance on current account
-12 710
-619
-5.1
Balance on goods and services
-2 574
89
3.3
Net goods
96
-183
-65.6
Net services
-2 671
271
9.2
Net primary income
-9 619
-706
-7.9
Net secondary income
-517
-2
-0.4

Trend

Balance on current account
-11 553
209
1.8
Balance on goods and services
-1 743
547
23.9
Net goods
990
486
96.4
Net services
-2 733
61
2.2
Net primary income
-9 294
-355
-4.0
Net secondary income
-515
18
3.4




VOLUMES AND PRICES

Goods and Services

In seasonally adjusted chain volume terms, the balance on goods and services was a surplus of $8,486m, a rise of $2,867m (51%) on the June quarter 2013 surplus of $5,619m.

The net surplus on goods rose $1,645m (19%) on the June quarter 2013 surplus of $8,545m. Goods credits rose $93m and goods debits fell $1,552m (2%). The net deficit on services fell $1,223m (42%) on the June quarter 2013 deficit of $2,926m.

The increase in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to contribute 0.7 percentage points to growth in the September quarter 2013 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the June quarter 2013.

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



Terms of Trade and Implicit Price Deflator

Australia's seasonally adjusted terms of trade on net goods and services for the September quarter 2013 fell 3.3% to 87.4 with an increase of 3.0% in the implicit price deflator (IPD) for goods and services credits and an increase of 6.5% in the IPD for goods and services debits.

In trend terms, the terms of trade for net goods and services fell 0.9% to 88.6.

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



Goods

The trend estimate of net goods at current prices for the September quarter 2013 was a surplus of $990m, a rise of $486m (96%) on the June quarter 2013 surplus of $504m.

In seasonally adjusted terms at current prices, net goods was a surplus of $96m, a fall of $183m (66%) on the June quarter 2013 surplus of $279m.

GOODS, Price and volume analysis: Seasonally Adjusted - September Quarter 2013

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

Exports
2 253
3.5
0.1
3.4
Rural goods
83
0.9
-3.2
4.2
Non-rural goods
2 649
5.2
1.8
3.3
Net exports of goods under merchanting
7
8.2
3.4
4.8
Non-monetary gold
-486
-12.4
-14.4
2.3
Imports
2 435
3.8
-2.4
6.3
Consumption goods
1 065
5.5
-
5.5
Capital goods
1
-
-6.5
7.0
Intermediate and other merchandise goods
1 324
4.9
-1.8
6.8
Non-monetary gold
44
3.6
1.5
2.0

- nil or rounded to zero (including null cells)
(a) Reference year 2011-12



Services

SERVICES, Price and volume analysis: Seasonally Adjusted - September Quarter 2013

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

Exports
284
2.1
1.1
1.0
Manufacturing services on physical inputs owned by others
3
300.0
300.0
0.8
Maintenance and repair services n.i.e.
14
82.4
87.5
0.8
Transport
-2
-0.1
-1.7
1.6
Travel
255
3.2
2.2
1.0
Other services
14
0.4
-0.5
0.9
Imports
13
0.1
-6.8
7.4
Manufacturing services on physical inputs owned by others
-
-
-
-
Maintenance and repair services n.i.e.
66
71.0
57.8
8.7
Transport
12
0.3
-5.7
6.3
Travel
-11
-0.2
-6.9
7.2
Other services
-54
-1.0
-8.9
8.6

- nil or rounded to zero (including null cells)
(a) Reference year 2011-12



GOODS CREDITS

The trend estimate of goods credits at current prices rose $1,741m (3%) to $66,597m in the September quarter 2013.

In seasonally adjusted terms at current prices, goods credits rose $2,253m (3%) to $66,916m, with prices up 3%.


Rural Goods

Exports of rural goods, in seasonally adjusted terms at current prices, rose $83m (1%) to $9,578m, with volumes down 3% and prices up 4%. The main component contributing to the rise was meat and meat preparations, up $239m (12%), with volumes up 7% and prices up 4%.

Partly offsetting this rise was cereal grains and cereal preparations component, down $165m (7%), with volumes down 12% and prices up 6%.


Non-rural Goods

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $2,649m (5%) to $53,806m, with volumes up 2% and prices up 3%. The main components contributing to the rise were:
  • metal ores and minerals, up $1,475m (7%), with volumes up 2% and prices up 5%
  • other mineral fuels, up $383m (6%), with volumes up 8% and prices down 2%
  • other manufactures, up $203m (5%), with volumes up 2% 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, rose $7m (8%), with volumes up 3% and prices up 5%.


Non-monetary Gold

Non-monetary gold, in original and seasonally adjusted terms at current prices, fell $486m (12%), with volumes down 14% and prices up 2%.


GOODS DEBITS

The trend estimate of goods debits at current prices rose $1,255m (2%) to $65,607m in the September quarter 2013.

In seasonally adjusted terms at current prices, goods debits rose $2,435m (4%) to $66,819m, with volumes down 2% and prices up 6%.


CONSUMPTION GOODS

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $1,065m (6%) to $20,415m with prices up 6%. The main components contributing to the rise were:
  • non-industrial transport equipment, up $360m (8%), with volumes up 6% and prices up 2%
  • consumption goods n.e.s., up $275m (4%), with volumes down 2% and prices up 6%
  • food and beverages, mainly for consumption, up $216m (8%), with volumes up 2% and prices up 7%.


Capital Goods

Imports of capital goods, in seasonally adjusted terms at current prices, rose $1m to $16,836m with volumes down 7% and prices up 7%. The main components contributing to the rise were:
  • machinery and industrial equipment, up $275m (6%), with volumes down 3% and prices up 9%
  • ADP equipment, up $124m (7%), with volumes down 1% and prices up 7%
  • industrial transport equipment n.e.s., up $124m (6%), with volumes up 4% and prices up 1%.

Partly offsetting these rises was the capital goods n.e.s. component, down $486m (11%), with volumes down 17% and prices up 8%.


Intermediate and Other Merchandise Goods

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $1,324m (5%) to $28,299m, with volumes down 2% and prices up 7%. The main components contributing to the rise were:
  • fuels and lubricants, up $300m (3%), with volumes down 3% and prices up 6%
  • other parts for capital goods, up $272m (8%), with volumes up 1% and prices up 7%
  • processed industrial supplies n.e.s., up $267m (4%), with volumes down 3% and prices up 7%
  • parts for transport equipment, up $154m (6%), with prices up 6%.


Non-monetary Gold

Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, rose $44m (4%) to $1,269m, with volumes up 2% and prices up 2%.


SERVICES

The trend estimate of net services at current prices was a deficit of $2,733m, a fall of $61m (2%) on the June quarter 2013 deficit of $2,794m.

In seasonally adjusted terms at current prices, net services was a deficit of $2,671m, a fall of $271m (9%) on the June quarter 2013 deficit of $2,942m.


Services Credits

Services credits, in seasonally adjusted terms at current prices, rose $284m (2%) to $13,562m with volumes up 1% and prices up 1%. The main component contributing to the rise was travel, up $255m (3%), with volumes up 2% and prices up 1%.

In seasonally adjusted terms, tourism related service credits rose $242m (3%) to $8,651m.


Services Debits

Services debits, in seasonally adjusted terms at current prices, rose $13m to $16,233m, with volumes down 7% and prices up 7%. The main component contributing to the rise was maintenance and repair services n.i.e., up $66m (71%), with volumes up 58% and prices up 9%.

Partly offsetting this rise was the other services component, down $54m (1%), with volumes down 9% and prices up 9%.

In seasonally adjusted terms, tourism related service debits fell $131m (2%) to $8,328m.


PRIMARY INCOME

The trend estimate of the net primary income deficit at current prices rose $355m (4%) to $9,294m in the September quarter 2013.

The seasonally adjusted estimate of the net primary income deficit at current prices rose $706m (8%) to $9,619m in the September quarter 2013.

NET PRIMARY INCOME
Graph: NET PRIMARY INCOME



Primary Income Credits

Primary income credits, in seasonally adjusted terms at current prices, fell $797m (6%) to $11,797m mainly driven by a fall of $829m (16%) in direct investment assets, investment income on equity and investment fund shares.


Primary Income Debits

Primary income debits, in seasonally adjusted terms at current prices, fell $92m to $21,415m driven by a fall of $849m (20%) in portfolio investment liabilities, investment income on equity and investment fund shares. The fall was partly offset by a rise of $466m (8%) in portfolio investment income interest, a rise of $141m (8%) in other investment income liabilities and a rise of $77m (1%) in direct investment liabilities, investment income on equity and investment fund shares.


SECONDARY INCOME

The trend estimate of the net secondary income deficit at current prices, fell $18m (3%) to $515m in the September quarter 2013.

In seasonally adjusted terms, the net secondary income deficit at current prices, rose $2m to $517m in the September quarter 2013.


FINANCIAL ACCOUNT

The balance on financial account, in original terms, recorded a net inflow of $15.1b, which was driven by a net inflow of debt of $17.8b partly offset by a net outflow of equity of $2.6b.

The financial account surplus increased $6.5b to $15.1b in the September quarter 2013, from $8.6b in the June quarter 2013.

Direct investment recorded a net inflow of $6.1b in the September quarter 2013, a decrease of $4.0b from the net inflow of $10.1b in the June quarter 2013. This was driven by direct investment liabilities which recorded an inflow of $11.0b, an increase of $0.1b on the inflow of $10.9b in the June quarter 2013, partly offset by direct investment assets which recorded an outflow of $4.9b, an increase of $4.1b on the outflow of $0.8b in the June quarter 2013.

Portfolio investment recorded a net inflow of $7.6b, a decrease of $9.3b on the net inflow of $16.9b in the June quarter 2013. This was driven by a net inflow recorded for debt securities of $9.5b, a decrease of $1.0b on the inflow of $10.5b in the June quarter 2013, partly offset by equity and investment fund shares which recorded a net outflow of $1.9b, a turnaround of $8.3b on the inflow of $6.4b in the June quarter 2013.

Financial derivatives recorded a net outflow of $6.7b, an increase of $3.7b from the net outflow of $3.0b in the June quarter 2013.

Other investment recorded a net inflow of $8.5b, a turnaround of $25.5b from the net outflow of $17.0b in the June quarter 2013. This was driven by a net inflow of $7.8b of currency and deposits with deposit taking institutions, a turnaround of $20.1b on the net outflow of $12.4b in the June quarter 2013.

Reserve assets recorded a net outflow of $0.4b, a turnaround of $2.0b from the net inflow of $1.6b in the June quarter 2013.


INTERNATIONAL INVESTMENT POSITION


ANALYSIS

Australia's net international investment position at 30 September 2013 was a net foreign liability of $854.9b, up $42.9b on the 30 June 2013 position of $812.0b.

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

INTERNATIONAL INVESTMENT POSITION, Summary - September Quarter 2013

Net international investment position
Net foreign equity
Net foreign debt
$m
$m
$m

Position at beginning of period
812 014
19 181
792 832
Changes in position reflecting
Transactions
15 116
-2 633
17 750
Price changes
20 325
13 916
6 408
Exchange rate changes
11 835
3 420
8 415
Other adjustments
-4 424
-8 080
3 656
Total changes
42 852
6 623
36 229
Position at end of period
854 866
25 804
829 062




SUPPLEMENTARY INFORMATION


CONDITIONS

The conditions in the global economy showed moderate increases for most countries in the September quarter 2013. 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: China (2.2%), Korea (1.1%), UK (0.8%), USA (0.7%), Japan (0.5%), Germany (0.3%), Netherlands (0.1%), Spain (0.1%), Italy (-0.1%) and France (-0.1%).

Australia's international investment activities during the quarter were as follows:
  • foreign asset transactions were $7.3b in the September quarter 2013 compared to -$8.2b in the June quarter 2013
  • foreign liability transactions were $7.8b in the September quarter 2013 compared to $16.8b in the June quarter 2013.

The Australian share market, as measured by the MSCI global index(footnote 2) , increased 8.1% in the September quarter 2013, compared to the 2.9% decrease in the June quarter 2013. There were increases in all major markets: Europe (excluding UK) 14.3%, France 10.7%, Germany 8.2%, Hong Kong 8.1%, New Zealand 6.5%, Canada 5.4%, Japan 4.7%, Switzerland 4.6%, United Kingdom 4.0% and Singapore 2.1%. A market price change of -$18.5b was recorded for foreign equity assets and $32.4b in foreign equity liabilities in the September quarter 2013.

According to Bloomberg(footnote 3) , the composite corporate benchmark yield decreased in Australia from 4.40% to 4.25%, in UK from 3.74% to 3.64%, in the US from 3.44% to 3.38%, in Germany from 2.26% to 2.17% and in Japan from 0.62% to 0.53%. The long term 10 year government bond yields increased in the UK from 2.46% to 2.73%, in the US from 2.52% to 2.64% and in Germany from 1.73% to 1.78% while in Japan the rate decreased from 0.84% to 0.69%. In Australia, the rate increased from 3.54% to 4.00%. Market price changes were recorded for both portfolio debt securities liabilities of -$3.2b and assets of $2.8b in the September quarter 2013.

The Australian dollar depreciated against a number of the major currencies in the September quarter 2013. It decreased 5.6% against the South Korean won, 5.3% against the New Zealand dollar, 5.1% against the UK pound sterling, 3.8% against the Swedish krona, 3.7% against the Swiss franc, 2.8% against the Euro, 2.0% against Danish krona, and 0.05% against Chinese renminbi. It also saw gains of 17.8% against the Indonesian rupiah, 10.3% against the PNG kina, 5.5% against the Indian rupee, 3.3% against the Malaysian ringgit, 3.0% against the Sri Lankan rupee, 2.7% against the Philippine peso, 2.2% against the South African rand and 0.37% against the US dollar. The Trade Weighted Index (TWI)(footnote 4) , (footnote 5) recorded a decrease of 0.3%. This is reflected in the exchange rate changes for foreign assets of $7.0b and foreign liabilities of $4.8b.


RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6)

In original terms, the IPD for total goods credits rose 4.4% and the chain Laspeyres price index for goods exports rose 4.3%. The export price index (EPI) rose 4.2% during the September quarter 2013.

In original terms, the IPD for total goods debits rose 6.6% and the chain Laspeyres price index for goods imports rose 6.5%. The import price index (IPI) rose 6.1% during the September quarter 2013.

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 - September Quarter 2013

Changes 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
4.4
4.2
4.3
Services
1.0
1.0
na
1.1
Imports
Goods
6.3
6.6
6.1
6.5
Services
7.4
7.4
na
7.4

na not available
(a) Reference year 2011-12
(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(footnote 7) (average monthly index) for rural commodities increased 2.7% between the June quarter 2013 and September quarter 2013 while the EPI for rural goods increased 6.0%.

The RBA Commodity Price Index for non-rural commodities increased 4.5% while the EPI for non-rural goods total (excluding non-monetary gold) increased 4.0%.

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.

1 Economic Outlook - Real Gross Domestic Product Forecast Nov 2013, Organisation for Economic Cooperation and Development - Economic Department, viewed 25 November 2013, http://www.oecd.org/eco/economicoutlook.htm> <back
2 MSCI All Country Indices 2013, Morgan Stanley Capital International, viewed 25 November 2013, http://www.msci.com/products/indices/country_and_regional/all_country/>. <back
3 Bloomberg, Blooming Corporate Services, viewed 25 November 2013. <back
4 Exchange Rates - Daily - 2010 to Current 2013, Reserve Bank of Australia - Statistical Tables, viewed 1 October 2013, http://www.rba.gov.au/statistics/tables/index.html> <back
5 Bloomberg, Blooming Corporate Services, viewed 1 October 2013 <back
6 In this commentary movements in indexes are based on data to four decimal places. <back
7 For RBA Commodity Price Index methodology, see paragraph 23 of the Explanatory Notes. <back