5302.0 - Balance of Payments and International Investment Position, Australia, Dec 2006  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 02/03/2007   
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ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

The trend estimate of the balance on current account for the December quarter 2006 was a deficit of $14,250m, an increase of $767m (6%) on the deficit recorded for the September quarter 2006 where:

  • the goods and services deficit rose $122m (5%) to $2,740m
  • the income deficit rose $632m (6%) to $11,372m
  • the current transfers deficit rose $14m (11%) to $139m.

In seasonally adjusted terms, the current account deficit rose $2,493m (20%) to $15,096m between the September quarter 2006 and December quarter 2006 where:
  • the goods and services deficit rose $2,089m (143%) to $3,554m
  • the income deficit rose $407m (4%) to $11,406m
  • the current transfers deficit fell $3m (2%) to $136m.

Goods and Services

The trend estimate of the balance on goods and services at current prices was a deficit of $2,740m, an increase of $122m (5%) on the September quarter 2006 deficit.


In seasonally adjusted terms, the balance on goods and services was a deficit of $3,554m, an increase of $2,089m (143%) on the September quarter 2006 deficit where:

  • the net goods deficit rose $1,982m (108%) to $3,811m
  • the net services surplus fell $107m (29%) to $257m.

The increase in the goods deficit resulted from higher goods imports, up $1,935m (4%) and lower goods exports, down $46m.


The increase in goods debits was driven by:

  • capital goods, up $846m (9%)
  • consumption goods, up $680m (5%)
  • intermediate and other merchandise goods, up $252m (1%)
  • other goods, up $157m (9%).

The decrease in goods credits was driven by:
  • rural goods, down $164m (2%)
  • other goods, down $129m (4%)
  • partly offset by non-rural goods, up $247m (1%).

The decrease in the services surplus resulted from higher services debits, up $306m (3%), partly offset by higher services credits, up $200m (2%).


In seasonally adjusted volume terms, the deficit on goods and services was $11,410m, an increase of $2,993m (36%) on the $8,417m deficit recorded in the September quarter 2006. The net deficit on goods rose $2,807m (33%) to $11,257m. Goods debits rose $3,070m (7%) and goods credits rose $263m (1%). The net services deficit of $153m was a turnaround of $187m on the surplus of $34m in September quarter 2006.


The increase of $2,993m in the deficit on goods and services in volume terms could be expected to contribute -1.3 percentage points to growth in the December quarter 2006 volume measures of GDP, assuming no significant revision to the GDP chain volume estimate for the September quarter 2006.

Goods and Services(a)
Graph: Goods and Services



Goods Credits

The trend estimate of goods credits rose $493m (1%) to $42,702m in the December quarter 2006.


In seasonally adjusted current price terms, goods credits fell $46m to $42,289m.


Exports of rural goods, in seasonally adjusted terms at current prices, fell $164m (2%) to $6,557m, with volumes down 6% and prices up 3%. The decrease was driven by cereal grains and cereal preparations, down $369m (25%), with volumes down 31% and prices up 10%.


Partly offsetting this decrease were rises in:

  • meat and meat preparations, up $99m (5%), with volumes up 3% and prices up 2%
  • other rural, up $65m (2%), with both volumes and prices up 1%
  • wool and sheepskins, up $41m (6%), with volumes down 2% and prices up 9%.

Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $247m (1%) to $32,812m, with volumes up 3% and prices down 2%. The largest increases were in:
  • metals ores and minerals, up $223m (3%), largely on increased volumes
  • metals (excluding non-monetary gold), up $171m (5%), largely on increased prices
  • transport equipment, up $87m (8%), largely on increased volumes.

Partly offsetting these increases were falls in:
  • coal, coke and briquettes, down $215m (4%), with volumes up 1% prices down 4%
  • machinery, down $46m (2%), with both volumes and prices down 1%.

Exports of other goods, in seasonally adjusted terms at current prices, fell $129m (4%) to $2,920m. The largest decreases were in:
  • non-monetary gold, down $50m (2%) with volumes up 1% and prices down 3%
  • goods for processing, down $43m (38%), with volumes down 36% and prices down 3%
  • goods procured in ports by carriers, down $32m (9%), with volumes up 2% and prices down 11%.
General Merchandise Credits(a)
Graph: General Merchandise Credits



Goods Debits

The trend estimate of goods debits rose $649m (1%) to $45,762m in the December quarter 2006.


In seasonally adjusted current price terms, goods debits rose $1,935m (4%) to $46,100m.


Imports of consumption goods, in seasonally adjusted terms at current prices, rose $680m (5%) to $13,913m, with volumes up 6% and prices down 1%. All components contributed to the rise with the largest increases in:

  • non-industrial transport equipment, up $241 (7%), with volumes up 8% and prices down 1%
  • food and beverages, mainly for consumption, up $162m (10%), with volumes up 11% and prices down 1%
  • household electrical items, up $142m (13%), with volumes up 16% and prices down 3%.

Imports of capital goods, in seasonally adjusted terms at current prices, rose $846m (9%) to $10,461m, with volumes up 10% and prices down 1%. The largest increases were in:
  • machinery and industrial equipment, up $368m (10%), largely on increased volumes
  • industrial transport equipment n.e.s., up $263m (20%), with volumes up 22% and prices down 1%
  • ADP equipment, up $154m (10%), with volumes up 12% and prices down 2%
  • telecommunications equipment, up $88m (7%), with volumes up 8% and prices down 1%.

Partly offsetting these increases was a fall in civil aircraft, down $55m (14%), with volumes down 13% and prices down 1%.


Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $252m (1%) to $19,776m, with volumes up 6% and prices down 5%. The largest increases were in:

  • iron and steel, up $194m (24%), with volumes up 20% and prices up 4%
  • other parts for capital goods, up $97m (4%), with volumes up 5% and prices down 1%
  • organic and inorganic chemicals, up $75m (7%), largely on increased volumes
  • primary industrial supplies n.e.s., up $67m (19%), largely on increased volumes
  • parts for transport equipment, up $61m (3%), largely on increased volumes.

Partly offsetting these increases were falls in:
  • fuels and lubricants, down $282m (5%), with volumes up 15% and prices down 18%
  • paper and paperboard, down $54m (9%), largely on decreased volumes.

Imports of other goods, in seasonally adjusted terms at current prices, rose $157m (9%) to $1,950m, driven by a rise in non-monetary gold, up $227m (20%), with volumes up 23% and prices down 2%. This was partly offset by a fall in goods for processing, down $114m (55%), with volumes down 56% and prices up 3%.

General Merchandise Debits(a)
Graph: General Merchandise Debits



Services

The trend estimate of net services at current prices was a surplus of $320m, an increase of $34m (12%) on the September quarter 2006 surplus of $286m.


In seasonally adjusted current price terms, net services recorded a surplus of $257m, a decrease of $107m (29%) on the September quarter 2006 surplus of $364m.


Services credits, in seasonally adjusted terms at current prices, rose $200m (2%) to $11,304m, with volumes up 1% and prices up 1%. The largest increases were in:

  • travel services, up $182m (3%), with volumes up 2% and prices up 1%
  • transportation services, up $22m (1%), with volumes down 2% and prices up 3%, mainly driven by passenger and other transportation services, up $24m (1%).

Partly offsetting these increases was a fall in other services, down $3m, with volumes down 1% and prices up 1%.


Services debits, in seasonally adjusted terms at current prices, rose $306m (3%) to $11,047m largely on increased volumes. All components contributed to the rise in the seasonally adjusted series with:

  • transportation services, up $184m (5%), due to:
      • passenger and other transportation services, up $94m (5%), with volumes up 3% and prices up 2%
      • freight transportation services, up $91m (5%), with volumes up 6% and prices down 1%.
  • travel services, up $75m (2%), with both volumes and prices up 1%
  • other services, up $46m (1%), largely on increased volumes.

Seasonally adjusted, tourism related services credits rose $234m (3%) to $7,246m, and tourism related services debits rose $210m (4%) to $5,760m.


Implicit Price Deflator

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits fell 0.5%. In original terms, it fell by 0.3%. The chain Laspeyres price index for goods and services credits fell 0.3%. In original terms, the IPD for goods credits fell 0.7% and the IPD for services credits rose 1.1%.


The total goods and services debits IPD fell 2.1% in seasonally adjusted terms. In original terms, it fell by 2.2%. The chain Laspeyres price index for goods and services debits fell 2.4%. In original terms, the IPD for goods debits fell 2.7% and the IPD for services debits rose 0.2%.

IMPLICIT PRICE DEFLATOR(a)
Graph: Implicit Price Deflator



Relationship to IPI and EPI

In original terms, the implicit price deflator for total goods credits fell 0.7% and the chain Laspeyres price index for goods exports fell 0.7%. The export price index (EPI) rose 0.2% during the December quarter 2006.


In original terms, the implicit price deflator for total goods debits fell 2.7% and the chain Laspeyres price index for goods imports fell 3.1%. The import price index (IPI) fell 3.2% during the December quarter 2006.


Terms of trade

Australia's seasonally adjusted terms of trade rose 1.7% to 117.9, with a 2.1% decrease in the goods and services debits IPD exceeding a 0.5% decrease in the IPD for goods and services credits. The trend estimate of the terms of trade increased 1.7% to 117.6.


Income

The trend estimate of the net income deficit rose $632m (6%) to $11,372m.


In seasonally adjusted terms, the net income deficit rose $407m (4%) to $11,406m. Income credits fell $385m (5%) to $7,193m and income debits rose $22m to $18,599m.


In original terms, the net income deficit fell $1,311m (11%) to $10,939m. Income credits rose $5m to $7,277m and income debits fell $1,306m (7%) to $18,216m. Income debits fell as a result of reduced portfolio investment equity dividend payments by trading enterprises, which are highly seasonal.

Net Income
Graph: Net Income



Current Transfers

In seasonally adjusted terms, the net current transfers deficit was $136m, a decrease of $3m (2%) on the $139m deficit recorded in the September quarter 2006. Current transfer credits fell $1m and current transfer debits fell $4m.



CAPITAL AND FINANCIAL ACCOUNT

Capital Account

In original terms, the capital account surplus was $345m, down $105m (23%) on the September quarter 2006 surplus. Capital transfer credits fell $55m (7%) to $702m and capital transfer debits rose $48m (16%) to $357m.


Financial Account

In original terms, the balance on financial account recorded a net inflow of $14.7b, with a $9.6b inflow of debt and a $5.1b inflow of equity.


Direct investment in Australia recorded an inflow of $12.7b in the December quarter 2006, an increase of $0.5b on the September quarter 2006 inflow of $12.2b. Australia's direct investment abroad recorded an outflow of $7.1b, a decrease of $2.7b on the previous quarter's outflow of $9.8b. In net terms, direct investment recorded an inflow of $5.6b, an increase of $3.2b on last quarter's inflow of $2.4b.


Portfolio investment recorded a net inflow of $16.6b, a decrease of $1.7b on the net inflow of $18.3b in the September quarter 2006. This flow reflects the continued issuance of debt securities, by residents, on non resident markets.


Other investment recorded a net inflow of $2.3b, a turnaround of $10.5b on the net outflow of $8.2b in the previous quarter.


Reserve assets recorded a net outflow of $10.5b, a turnaround of $12.6b on the previous quarter's net inflow of $2.1b.



INTERNATIONAL INVESTMENT POSITION


INTERNATIONAL INVESTMENT

Australia's net international investment position at 31 December 2006 was a net foreign liability of $606.9b, up $34.4b (6%) on 30 September 2006. The increase consisted of:

  • net transactions of $14.7b
  • price changes of $16.5b
  • exchange rate changes of $3.5b
  • other adjustments of -$0.4b.

During the December quarter 2006 the level of net debt liabilities increased by $7.5b (1.5%) to $521.2b. Net debt raisings of $9.6b and price changes of $4.3b were partially offset by exchange rate changes of -$6.7b .


During the December quarter 2006 net equity liabilities rose $26.9b (46%) to close at $85.8b. The major contributors to this increase were price changes of $12.3b, exchange rate changes of $10.2b and net transactions of $5.1b.



CALENDAR YEAR: 2006 SITUATION


BALANCE OF PAYMENTS

In original terms, the balance on current account was a deficit of $53.9b for the calendar year 2006, an increase of $0.4b (1%), on the deficit recorded for calendar year 2005.


The increase in the current account deficit was largely due to an increase of $5.5b (15%) in the net income deficit from $36.3b in 2005 to $41.8b in 2006. This was offset by a decrease of $4.8b in the net goods deficit from $17.5b in 2005 down to $12.6b in 2006. Net services recorded a surplus of $1.0b in 2006, an increase of $0.3b on the surplus recorded for 2005.


In 2006, the net income deficit increased $5.5b (15%), with a $7.2b (33%) increase in income credits more than offset by a $12.7b (22%) increase in income debits.


Goods exports increased $25.4b (18%) and goods imports increased $20.6b (13%). The largest increases in goods exports were in:

  • metal ores and minerals, up $9.1b (37%) to $33.4b
  • metals (excluding non-monetary gold), up $4.2b (45%) to $13.5b
  • non-monetary gold, up $3.8b (55%) to $10.6b.

For imports of goods, the largest increases were in:
  • fuels and lubricants, up $5.7b (34%), to $22.5b
  • non-monetary gold, up $2.6b (87%) to $5.5b
  • machinery and industrial equipment, up $1.3b (9%), to $15.0b.

Services exports rose $3.2b (8%) and services imports rose $2.8b (7%).


In original terms, the balance on financial account recorded a net inflow of $52.9b in 2006, an increase of $0.2b (0.4%) on the net inflow of $52.7b in 2005. The increased inflow was due to a $21.0b increase in net portfolio investment, a $5.6b increase in direct investment and a $2.5b increase in financial derivatives. The impact of this increase on the financial account was offset by:

  • a turnaround of $25.7b in other investment, from an inflow of $15.6b to an outflow of $10.1b
  • a decrease of $3.2b in reserve assets, from an outflow of $9.6b to an outflow of $12.7b.


INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position at 31 December 2006 was a net foreign liability of $606.9b. This was up $75.5b (14%) on the position a year earlier as a result of:
  • net transactions of $52.9b
  • price changes of $15.0b
  • exchange rate changes of $9.2b
  • other changes of -$1.6b.

During the 2006 calendar year, the level of net debt rose $51.1b (11%) to $521.2b. This was attributable to net transactions of $61.8b. This increase was partially offset by price changes of -$7.0b, exchange rate variations of -$2.0b and other changes of -$1.8b.


Net equity liabilities rose $24.4b (40%) to $85.8b. This was attributable to price changes of $22.0b, exchange rate effects of $11.1b, and other changes of $0.2b. This increase was partially offset by net transactions of -$9.0b.