Australias Current Account Balance Takes a Hit

Highlights:

• Australia's current account balance dropped by AU$7.6 billion to a deficit of AU$4.9 billion in the March quarter of 2024, driven by a smaller trade surplus and an increase in the net primary income deficit.
• The financial account reported a surplus of AU$8.3 billion, influenced by net inflows of equity, while Australia's net foreign equity asset position rose to its largest on record.
• The net trade fall is expected to detract 0.9 percentage points from the March quarter 2024 Gross Domestic Product (GDP) movement, raising concerns about the country's economic performance.

Australia's current account balance has experienced a significant decline, falling by $7.6 billion to a deficit of $4.9 billion in the March quarter of 2024. The figures were released by the Australian Bureau of Statistics (ABS).

Factors Driving the Deficit

The deficit can be attributed to a smaller trade surplus, largely driven by an increase in the imports of goods, along with a rise in the net primary income deficit.

Impact on Goods and Services

The balance on goods and services witnessed a substantial decline of AU$6.1 billion to AU$17.8 billion.

Implications on International Investment

The financial account reported a surplus of AU$8.3 billion, primarily influenced by net inflows of equity and partially offset by net outflows of debt. Notably, Australia's net foreign equity asset position rose to its largest on record

Trade and GDP

Import prices fell more sharply than export prices, which led to a quarterly rise in the terms of trade. However, the net trade fall is expected to detract 0.9 percentage points from the March quarter 2024

Primary Income and Foreign Investment

The primary income deficit widened, driven by higher profits on foreign direct investment, particularly in liquid natural gas (LNG) and industrial real estate. This resulted in a rise in Australia's foreign equity assets, reflecting the country's improved foreign investment position.

Conclusion

The unexpected deficit in Australia's current account balance has raised concerns about the country's economic performance and its implications on the overall GDP movement. The impact of this deficit on various sectors of the economy is likely to be closely monitored in the coming months

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