Today's release of the Balance of Payments shows the ABS estimates a further significant narrowing in the current account deficit in the March quarter to $4.6 billion. This represents 1.5 per cent of December quarter 2008 nominal GDP and is the lowest current account deficit as a proportion of GDP since the September quarter 2001.
The narrowing of the current account deficit was driven by a sharp increase in the trade surplus, which rose from $4.2 billion in the December quarter 2008 to $5.1 billion in the March quarter 2009. This is the largest trade surplus recorded since the series began in the September quarter 1959. A narrowing of the net income deficit also contributed to the narrowing of the current account deficit.
Net exports are expected to add 2.2 percentage points to GDP growth in the March quarter, reflecting an increase in export volumes and a significant decline in import volumes.
Export volumes rose by 2.7 per cent in the March quarter, to remain 3.5 per cent higher through the year. Exports of rural commodities drove the increase, rising by 18.3 per cent. Non-rural commodities, services and other goods also rose in the quarter. These rises were partially offset by a fall in exports of elaborately transformed manufactures, reflecting weaker global demand.
Import volumes fell by 7.0 per cent in the March quarter, to be 10.3 per cent lower through the year. This fall was driven by lower imports of intermediate and other merchandise goods, consumption goods imports, and capital goods imports.
The terms of trade fell by 7.8 per cent in the March quarter, driven by lower export prices. Export prices fell by 9.9 per cent in the quarter, reflecting declines in prices for a broad range of both rural and non-rural commodities.
Net foreign debt declined to $674.2 billion in the March quarter, representing 57.1 per cent of year‑ended December quarter 2008 nominal GDP. Australia's debt servicing ratio – the percentage of export earnings required to meet Australia's debt servicing repayments – fell in the March quarter to 9.8 per cent.
The Rudd Government is strengthening our economy by investing in the essential infrastructure we need to lift productive capacity and boost our international competitiveness. These nation building investments will help ensure that Australia is well positioned to make the most of the global recovery when it arrives.
2 June 2009