Australia: First current account surplus since 1975Q2 – Westpac

Andrew Hanlan, analyst at Westpac, suggests that today is an historic day for Australia as the current account has moved into surplus - the first surplus since the June quarter 1975 and the largest as a share of the economy since June 1973.

Key Quotes

“The current account printed a surplus of $5.9bn for the June quarter. This is a $7.0bn improvement on the previous quarter and some $18.5bn better than a year ago. The surplus represents 1.2% of GDP.”

“The key driver of the improved performance is sharply higher export earnings largely centred on rising commodity prices. Notable, was the iron ore price spike following the tailings dam disaster in Brazil. The iron ore price has since pulled-back in August.”

“The trade surplus climbed to $19.9bn (4.1% of GDP) in Q2, a record high (dating back to 1959). The trade position progressively improved after the deficit hit $12.0bn in 2015 Q4, when commodity prices were at their lows.”

“In the quarter, the terms of trade rose by 1.5%qtr, 8.9%yr.”

“Export earnings grew by 4.0% in the quarter to be 16.3% higher over the year - supported by higher prices, +2.5%qtr, +13.0%yr.”

“Export volumes resumed their upward trend in 2019, up 1.9% in Q1 and rising 1.4% in Q2, to be +2.9% for the year.”

“Import volumes are falling, -1.3%qtr, -2.8%yr, at a time of weak domestic demand and a lower AUD. In value terms, the import bill is little changed over the year, +0.9%.”