Today's Balance of Payments shows the continuing impact of the global recession on the Australian economy, with the current account deficit (CAD) widening to $13.3 billion in the June quarter, representing 4.4 per cent of March quarter GDP. This widening of the CAD was driven by a turnaround in the trade balance, which moved from a surplus of $4.3 billion in the March quarter to a deficit of $1.7 billion in the June quarter.
The global recession and the associated fall in commodity prices have had a major impact on Australia's export earnings which fell by a record $11 billion in the quarter. Export prices fell sharply, down 15.8 per cent in the quarter, reflecting declines in prices for a broad range of both rural and non-rural commodities. This is the largest fall in export prices since records began in 1959.
Combined with a 9.0 per cent fall in import prices, this led to a 7.4 per cent fall in Australia's terms of trade in the June quarter. The terms of trade have now fallen by 11.6 per cent over the past year and continue to represent a major challenge for the Australian economy as the global recession plays out.
The ABS estimates that net exports will subtract 0.2 of a percentage point from GDP growth in the June quarter, with a rise in export volumes more than offset by an increase in import volumes.
Export volumes rose by 1.0 per cent in the June quarter, but remain 0.2 per cent lower through the year. Exports of rural commodities, non-rural commodities, services and other goods all rose in the quarter. This was partially offset by a fall in exports of manufactures.
Import volumes rose by 2.1 per cent in the June quarter, to be 13.1 per cent lower through the year. Imports of consumption goods, services and intermediate goods rose in the quarter. Partially offsetting these rises were falls in imports of capital and other goods.
Net foreign debt fell to $633.2 billion in the June quarter. Australia's debt servicing ratio was 10.1 per cent in the June quarter.
The Government's nation building infrastructure investments will help expand Australia's productive capacity and will provide a sound basis for growth in jobs and exports in the future as the global economy recovers.
1 September 2009