5302.0 - Balance of Payments and International Investment Position, Australia, Sep 2014 Quality Declaration 
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

In original current price terms, the September quarter 2014 current account deficit was $15,094m, an increase of $4,625m (44%) on the June quarter 2014 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 2014

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

Seasonally Adjusted

Balance on current account
-12 525
1 423
10.2
Balance on goods and services
-4 381
186
4.1
Net goods
-1 815
-167
-10.1
Net services
-2 566
353
12.1
Net primary income
-7 606
1 239
14.0
Net secondary income
-538
-2
-0.4

Trend

Balance on current account
-13 043
-1 313
-11.2
Balance on goods and services
-4 539
-2 172
-91.8
Net goods
-1 910
-2 384
(a). .
Net services
-2 629
212
7.5
Net primary income
-7 972
850
9.6
Net secondary income
-532
9
1.7

. . not applicable
(a) See paragraph 5 of the Explanatory Notes.



VOLUMES AND PRICES

Goods and Services

In seasonally adjusted chain volume terms, the balance on goods and services was a surplus of $4,586m, a rise of $3,021m (193%) on the June quarter 2014 surplus of $1,565m.

The net surplus on goods rose $2,711m (83%) on the June quarter 2014 surplus of $3,277m. Goods credits rose $2,203m (3%) and goods debits fell $508m (1%). The net deficit on services fell $309m (18%) on the June quarter 2014 deficit of $1,712m.

The increase in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to contribute 0.8 percentage points to growth in the September quarter 2014 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the June quarter 2014.

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



Terms of Trade and Implicit Price Deflator(footnote 1)

Australia's seasonally adjusted terms of trade on net goods and services for the September quarter 2014 fell 3.5% to 89.5, with a decrease of 4.0% in the implicit price deflator (IPD) for goods and services credits and a decrease of 0.5% in the IPD for goods and services debits.

In trend terms, the terms of trade for net goods and services fell 3.0% to 90.3.

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 2014 was a deficit of $1,910m, a turnaround of $2,384m on the June quarter 2014 surplus of $474m.

In seasonally adjusted terms at current prices, net goods was a deficit of $1,815m, an increase of $167m (10%) on the June quarter 2014 deficit of $1,648m.

GOODS, Price and volume analysis: Seasonally Adjusted - September Quarter 2014

CHANGE IN:
Current prices
Current prices
Chain volume measures(a)
Import price deflators(a)(b)
$m
%
%
%

Exports
-1 133
-1.7
3.3
-4.9
Rural goods
146
1.5
-
1.5
Non-rural goods
-1 883
-3.6
2.6
-6.0
Net exports of goods under merchanting
3
13.0
25.0
-8.5
Non-monetary gold
601
19.1
21.9
-2.3
Imports
-966
-1.4
-0.8
-0.6
Consumption goods
103
0.5
0.8
-0.3
Capital goods
-272
-1.7
-2.7
1.0
Intermediate and other merchandise goods
-661
-2.2
-0.5
-1.7
Non-monetary gold
-136
-13.8
-10.2
-4.0

- 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

SERVICES, Price and volume analysis: Seasonally Adjusted - September Quarter 2014

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

Exports
143
1.0
0.6
0.4
Manufacturing services on physical inputs owned by others
-4
-66.7
-66.7
0.2
Maintenance and repair services n.i.e.
-1
-6.3
-6.3
0.2
Transport
-34
-2.1
-2.7
0.7
Travel
223
2.6
2.2
0.3
Other services
-41
-1.0
-1.2
0.3
Imports
-210
-1.2
-1.4
0.2
Manufacturing services on physical inputs owned by others
-
-
-
-
Maintenance and repair services n.i.e.
-52
-38.5
-39.2
0.2
Transport
-51
-1.3
-1.4
0.2
Travel
65
0.9
0.7
0.2
Other services
-172
-3.0
-3.3
0.3

- 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.



GOODS CREDITS

The trend estimate of goods credits at current prices fell $2,496m (4%) to $64,798m in the September quarter 2014.

In seasonally adjusted terms at current prices, goods credits fell $1,133m (2%) to $64,394m, with volumes up 3% and prices down 5%.


Rural Goods

Exports of rural goods, in seasonally adjusted terms at current prices, rose $146m (2%) to $9,831m, with prices up 2%. The main component contributing to the rise was meat and meat preparations, up $347m (13%), with volumes up 7% and prices up 6%.

Partly offsetting this rise was cereal grains and cereal preparations, down $166m (8%), with volumes down 6% and prices down 1%.


Non-rural Goods

Exports of non-rural goods, in seasonally adjusted terms at current prices, fell $1,883m (4%) to $50,790m, with volumes up 3% and prices down 6%. The main components contributing to the fall were:
  • metal ores and minerals, down $1,343m (6%), with volumes up 6% and prices down 11%
  • other mineral fuels, down $560m (7%), with volumes down 7%.
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 $3m (13%), with volumes up 25% and prices down 9%.


Non-monetary Gold

Non-monetary gold, in original and seasonally adjusted terms at current prices, rose $601m (19%), with volumes up 22% and prices down 2%.


GOODS DEBITS

The trend estimate of goods debits at current prices fell $112m to $66,707m in the September quarter 2014.

In seasonally adjusted terms at current prices, goods debits fell $966m (1%) to $66,209m, with volumes down 1% and prices down 1%.


Consumption Goods

Imports of consumption goods, in seasonally adjusted terms at current prices, rose $103m (1%) to $20,574m, with volumes up 1%. The main components contributing to the rise were:
  • non-industrial transport equipment, up $152m (3%), with volumes up 3%
  • toys, books and leisure goods, up $40m (3%), with volumes up 5% and prices down 2%.

Partly offsetting these rises was textiles, clothing and footwear, down $73m (2%), with volumes down 2%.


Capital Goods

Imports of capital goods, in seasonally adjusted terms at current prices, fell $272m (2%) to $15,601m, with volumes down 3% and prices up 1%. The main components contributing to the fall were:
  • capital goods n.e.s., down $865m (29%), with volumes down 30% and prices up 1%
  • industrial transport equipment n.e.s., down $87m (5%), with volumes down 5% and prices up 1%.

Partly offsetting these rises was civil aircraft and confidentialised items, up $746m (50%), with volumes up 50%.


Intermediate and Other Merchandise Goods

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, fell $661m (2%) to $29,184m, with prices down 2%. The main components contributing to the fall were:
  • processed industrial supplies n.e.s., down $398m (5%), with volumes down 6% and prices up 1%
  • organic and inorganic chemicals, down $196m (18%), with volumes down 16% and prices down 2%
  • fuels and lubricants, down $146m (1%), with volumes up 4% and prices down 5%.

Partly offsetting these falls was primary industrial supplies n.e.s., up $100m (29%), with volumes up 24% and prices up 5%.


Non-monetary Gold

Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, fell $136m (14%) to $850m, with volumes down 10% and prices down 4%.


SERVICES

The trend estimate of net services at current prices was a deficit of $2,629m, a fall of $212m (7%) on the June quarter 2014 deficit of $2,841m.

In seasonally adjusted terms at current prices, net services was a deficit of $2,566m, a fall of $353m (12%) on the June quarter 2014 deficit of $2,919m.


Services Credits

Services credits, in seasonally adjusted terms at current prices, rose $143m (1%) to $14,754m, with volumes up 1%. The main component contributing to the rise was travel, up $223m (3%), with volumes up 2%.

Partly offsetting this rise were:
  • other services, down $41m (1%), with volumes down 1%
  • transport, down $34m (2%), with volumes down 3% and prices up 1%.

In seasonally adjusted terms, tourism related service credits rose $200m (2%) to $9,530m.


Services Debits

Services debits, in seasonally adjusted terms at current prices, fell $210m (1%) to $17,320m, with volumes down 1%. The main components contributing to the fall were:
  • other services, down $172m (3%), with volumes down 3%
  • maintenance and repair services n.i.e., down $52m (39%), with volumes down 39%
  • transport, down $51m (1%), with volumes down 1%.

Partly offsetting these rises was travel, up $65m (1%), with volumes up 1%.

In seasonally adjusted terms, tourism related service debits rose $55m (1%) to $9,133m.


PRIMARY INCOME

The trend estimate of the net primary income deficit at current prices fell $850m (10%) to $7,972m in the September quarter 2014.

The seasonally adjusted estimate of the net primary income deficit at current prices fell $1,239m (14%) to $7,606m in the September quarter 2014.

NET PRIMARY INCOME
Graph: NET PRIMARY INCOME



Primary Income Credits

Primary income credits, in seasonally adjusted terms at current prices, rose $1,392m (11%) to $13,902m. The main component contributing to the rise was portfolio investment assets, investment income on equity and investment fund shares, which rose $905m (26%).


Primary Income Debits

Primary income debits, in seasonally adjusted terms at current prices, rose $153m (1%) to $21,508m. The main component contributing to the rise was direct investment liabilities, income on equity and investment fund shares, which rose $473m (7%).


SECONDARY INCOME

The trend estimate of the net secondary income deficit at current prices, fell $9m (2%) to $532m in the September quarter 2014.

In seasonally adjusted terms, the net secondary income deficit at current prices, rose $2m to $538m in the September quarter 2014.


FINANCIAL ACCOUNT

The balance on the financial account, in original terms, recorded a net inflow of $15.2b, which was driven by a net inflow of equity of $17.3b and a net outflow of debt of $2.1b.

The financial account surplus increased $4.5b to $15.2b in the September quarter 2014, from $10.7b in the June quarter 2014.

Direct investment recorded a net inflow of $21.2b in the September quarter 2014, an increase of $5.8b from the net inflow of $15.4b in the June quarter 2014, where:
  • direct investment liabilities recorded an inflow of $20.3b, an increase of $6.7b on the inflow of $13.6b in the June quarter 2014
  • direct investment assets recorded an inflow of $0.9b, a decrease of $0.9b on the inflow of $1.7b in the June quarter 2014.

Portfolio investment recorded a net outflow of $3.6b, a turnaround of $12.4b on the net inflow of $8.9b in the June quarter 2014, where:
  • debt securities recorded a net outflow of $9.2b, a turnaround of $26.9b on the inflow of $17.7b in the June quarter 2014
  • equity and investment fund shares recorded a net inflow of $5.7b, a turnaround of $14.5b on the outflow of $8.8b in the June quarter 2014.

Financial derivatives recorded a net outflow of $0.4b, a decrease of $6.2b from the net outflow of $6.5b in the June quarter 2014.

Other investment recorded a net outflow of $5.7b, remaining steady on the net outflow in the June quarter 2014. This was driven by a net outflow of $9.8b of currency and deposits, a turnaround of $20.1b on the net inflow of $10.2b in the June quarter 2014. This was offset by loans which recorded a net inflow of $5.2b, a turnaround of $22.3b on the net outflow of $17.1b in the June quarter 2014.

Reserve assets recorded an inflow of $3.7b, a turnaround of $5.0b on the outflow of $1.2b in the June quarter 2014.


INTERNATIONAL INVESTMENT POSITION


ANALYSIS

Australia's net international investment position at 30 September 2014 was a net foreign liability of $875.3b, up $9.4b on the 30 June 2014 position of $865.9b.

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

INTERNATIONAL INVESTMENT POSITION, Summary - September Quarter 2014

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

Position at beginning of period
865 880
1 685
864 194
Changes in position reflecting
Transactions
15 233
17 297
-2 064
Price changes
5 553
13 147
-7 594
Exchange rate changes
-7 555
-32 663
25 108
Other adjustments
-3 855
-7 083
3 227
Total changes
9 375
-9 302
18 677
Position at end of period
875 254
-7 617
882 871




SUPPLEMENTARY INFORMATION


CONDITIONS

The economic conditions globally showed modest growth for most countries in the September quarter 2014. According to the Organisation for Economic Cooperation and Development (OECD)(footnote 2) , preliminary real GDP estimates in volume measures showed quarterly growth for: Indonesia (1.2%), USA (0.9%), South Korea (0.9%), UK (0.7%), Spain (0.5%), France (0.3%), Belgium (0.2%), Italy (-0.1%) and Japan (-0.4%).

Australia's international investment activities during the quarter were as follows:
  • foreign asset transactions were -$7.1b in the September quarter 2014 compared to -$16.6b in the June quarter 2014
  • foreign liability transactions were $22.3b in the September quarter 2014 compared to $27.3b in the June quarter 2014.

The Australian share market, as measured by the MSCI Global Index(footnote 3) , decreased 2.0% during the September quarter 2014, following no change over the June quarter 2014. There were increases in the following markets: Japan 5.1%, Switzerland 2.9%, New Zealand 0.7% and USA 0.4%. Decreases were reported for the following economies: Germany 3.7%, Hong Kong 3.1%, UK 1.8%, France 0.8%, Singapore 0.2% and Canada 0.2%. A market price change of $1.6b was recorded for portfolio foreign equity assets, and -$5.9b for portfolio foreign equity liabilities in the September quarter 2014.

According to Bloomberg(footnote 4) , the composite corporate benchmark yield increased in Australia from 3.99% to 4.01% and USA from 3.00% to 3.18%. While yields decreased for UK from 3.59% to 3.39%, Germany from 1.56% to 1.32% and Japan from 0.38% to 0.37%. The long term 10 year government bond yields decreased in all four major markets: USA from 2.53% to 2.52%, UK from 2.68% to 2.43%, Germany from 1.25% to 0.90% and Japan from 0.57% to 0.53%. In Australia, the rate decreased from 3.70% to 3.55%. Market price changes were recorded for portfolio debt securities assets of $1.0b and liabilities of $0.2b in the September quarter 2014.

The Australian dollar depreciated against a number of the major currencies in the September quarter 2014. It decreased 8.0% against the Chinese renminbi, 7.6% against the Vietnamese dong, 7.1% against the US dollar, 6.9% against the Hong Kong dollar, 5.2% against the Singapore dollar, 4.7% against the Indonesian rupiah, 4.7% against the Indian rupee, 3.1% against the South Korean won, 3.0% against the Canadian dollar, 2.8% against the Norwegian krone, 2.7% against the UK pound sterling, 0.9% against the Swiss franc and 0.1% against the European euro. The Australian dollar appreciated 4.2% against the New Zealand dollar, 0.3% against the Japanese yen and 0.1% against the Swedish krona. The Trade Weighted Index (TWI)(footnote 5), (footnote 6) recorded a decrease of 4.3%. This is reflected in the exchange rate changes for foreign assets of -$45.2b and foreign liabilities of $37.7b in the September quarter 2014.


RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 7)

In original terms, the IPD for total goods credits fell 5.0% and the chain Laspeyres price index for goods exports fell 3.6%. The Export Price Index (EPI)(footnote 8) fell 3.9% during the September quarter 2014.

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)9 fell 0.8% during the September 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.

GOODS AND SERVICES, Price comparison - September Quarter 2014

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
-4.9
-5.0
-3.9
-3.6
Services
0.4
0.4
na
0.3
Imports
Goods
-0.6
-0.4
-0.8
-0.6
Services
0.2
0.2
na
0.2

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(footnote 9) (average monthly index) for rural commodities decreased 5.5% between the June and September quarter 2014 while the EPI for rural goods increased 1.2%.

The RBA Commodity Price Index for non-rural commodities decreased 5.8% while the EPI for non-rural goods total (excluding non-monetary gold) decreased 5.1%.

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 20 November 2014, <back
3 MSCI Global Market Indexes 2014, Morgan Stanley Capital International, viewed 3 October 2014, <back
4 Bloomberg, Blooming Corporate Services, viewed 2 October 2014 <back
5 Exchange Rates – Daily – 2014 to Current, Reserve Bank of Australia – Statistical Tables, viewed 3 October 2014, <back
6 Bloomberg, Blooming Corporate Services, viewed 2 October 2014 <back
7 In this commentary movements in indexes are based on data to four decimal places <back
8 Source: International Trade Price Indexes, Australia (cat. no. 6457.0) <back
9 For RBA Commodity Price Index methodology, see paragraph 23 of the Explanatory Notes <back