Australian current account Q3 2017: exports expand, matched by rising imports – Westpac

Andrew Hanlan, Research Analyst at Westpac, notes that Australia's current account deficit (CAD) has widened modestly during 2017, notwithstanding a slight improvement in the September quarter.

Key Quotes

“The 2017 trend partially reverses the significant improvement in the current account evident during 2016, with commodity prices and the terms of trade moving a little lower of late.”

“The CAD was $9.1bn in the September quarter 2017, some $539mn lower than in June but representing a $4.5bn widening from the low at the end of 2016.”

“The current account deficit is currently relatively low by historical experience, at 2.0% of GDP. That compares with a post 1990 average of 4.2%. The trade balance is in surplus, +0.7% of GDP (vs an historic average of -1.0%) and the net income deficit at 2.7% of GDP is below the historic average of 3.2%.”

“In Q3, the trade surplus was $3.1bn, down from $3.4bn in Q2 as the terms of trade fell by 0.4%, following a 6.0% decline in Q2. Despite this, the terms of trade is still 17% above the low at the start of 2016.”

“The net income deficit was $12.2bn in the most recent quarter, narrowing from $13.1bn in the June quarter.”

“Export volumes advanced in the third quarter, increasing by 1.9%. That was matched by a 1.9% rise in imports, with both goods and services increasing to meet rising domestic demand. That saw real net exports as being neutral for Q3 GDP.”

“Export earnings were little changed in the September quarter, edging 0.2% lower. Export prices fell by 2.0%, dented by lower commodity prices.”

“The import bill was also little changed in Q3, edging 0.2% higher. The price of imports fell, declining by 1.6%, as the Australian dollar strengthened, up 5% against the US dollar, to 78.9¢, and rising some 2.9% on a TWI basis.”