Australia's current account surplus has reset to a new record high in Q3 coming in just below $24bn. Net exports are expected to add 1ppt to quarterly GDP growth. Export volumes partially rebounded in Q3 but imports contracted heavily amid the Delta lockdowns and the global supply chain pressures.
- Australia's current account surplus lifted by a further 4.4% in Q3 to $23.9bn, a new record high but lower than forecast by markets ($27.8bn). The surplus posted in Q2 was revised up from $20.5bn to $22.9bn.
- The trade surplus widened in the quarter to $38.9bn (up $8.1bn) as export credits lifted by 7.6%q/q to outpace a 1.6% rise in import spending.
- The income deficit increased sharply by $7.7bn to $14.3bn reflecting higher returns to foreign investors.
- ABS reported that net exports will add 1ppt to GDP growth in Q3
Balance of Payments — Q3 | The details
These remain extraordinary times in the history of Australia's trade performance as volatility associated with the pandemic has occured alongside a surge in commodity prices. The nation's surplus on current account has reset to a new record level for the 4th quarter in succession. After widening by 4.4% in Q3, the current account surplus now stands at $23.9bn and is equivalent to more than 4% of GDP. The widening in Q3 was driven by an $8.1bn rise in the trade balance, which more than offset a large increase in the income deficit ($7.7bn).
Trade volumes reflected the effects of the resumption of resources exports and the hit to imports amid the global supply chain pressures and the Delta lockdowns. Export volumes were coming off a 3.4% fall in Q2 and advanced by 1.2%q/q. Increased goods exports (2.7%q/q) more than made up for a fall in services (-8.4%q/q). The key dynamic was a rebound in resources (3.0%q/q) after adverse weather disrupted shipments in Q2 (-6.1%q/q). LNG (7.6%), metal ores (mainly iron ore) (3.1%) and coal (1.3%) all contributed.
Import volumes contracted sharply (-4.0%q/q) as global supply chain pressures weighed and as domestic demand conditions weakened through the lockdowns. Goods imports (-3.5%q/q) were hit by a large fall in consumption goods (-9.5%q/q) and by a more modest decline in intermediate goods (-1.5%q/q). Regarding the fall in consumption goods, the key factor here was a plunge in vehicle sales (-17.9%q/q) reflecting the hit to production caused by input shortages. This is consistent with the sharp decline in wholesaler inventories reported yesterday.
For context, exports are down 11.8% on pre-pandemic volumes and imports are lower by 8.9%. Highlighting the significant goods/services imbalances created by the pandemic, goods exports are only 1.8% below pre-pandemic levels compared to a 47.8% shortfall on services. For imports, goods are up 7.3% on pre-pandemic volumes but services are down 58.5%. The services side has been heavily affected by the closure of the international border over the pandemic.
With exports up in Q3 (1.2%) and imports down (-4%), net exports will make a positive contribution to GDP growth. The ABS estimates this contribution to be +1ppt; an outcome that would reverse the fall seen in Q2.
Balance of Payments — Q3 | Insights
Another record high seen on the current account surplus as the tailwinds from elevated commodity prices continued to support national income, albeit with iron ore rolling over more recently. Net exports are expected to add 1ppt in the quarter and should help contain the expected decline in GDP to no more than 3%. Exports rebounded in Q3 as resources shipments came back online, though global supply chain pressures and the domestic lockdowns hit imports.
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In other news today, the ABS reported public demand is expected to add 0.7ppt to quarterly GDP. Government spending lifted sharply in Q3 (3.6%), which looks to be attributable to the rollout of the Covid-19 vaccines.
