Balance of Payments, Government Finance — Q4 | By the numbers
- Australia's current account deficit narrowed sharply by $3.582bn in Q4 to -$A7.203bn. The market had forecast a contraction to -$9.2bn (prior rev: -$10.785bn from -$10.688bn)
- The trade surplus increased by $2.661bn to $A8.452bn for Q4 (prior rev: $5.764bn from $6.607bn)
- Net Exports are expected to subtract 0.2ppt from GDP growth in Q4, slightly larger than the -0.1ppt drag that had been anticipated (prior: +0.3ppt)
- The separate Government Finance data showed growth in underlying public demand lifted by 1.6% in Q4 (prior +2.4%). The ABS reported that this was expected to add 0.3ppt to GDP growth in the quarter.
Balance of Payments, Government Finance — Q4 | The details
Looking at the Balance of Payments, the current account deficit narrowed from -$10.785bn to -$7.203bn over Q4. This was driven by the trade balance (balance of goods and services) increasing by $2.661bn to $8.452bn. Earnings from goods and services exported lifted by 3.3% to $11.462bn, which followed strong price rises for key commodities; LNG (+6%), iron ore (+9%) and coal (+4%). Accordingly, the terms of trade look to have risen by around 3% over the December quarter. The income deficit improved by 5.2% (or by $848m) in Q4 to -$15.318bn.
Looking at the Balance of Payments, the current account deficit narrowed from -$10.785bn to -$7.203bn over Q4. This was driven by the trade balance (balance of goods and services) increasing by $2.661bn to $8.452bn. Earnings from goods and services exported lifted by 3.3% to $11.462bn, which followed strong price rises for key commodities; LNG (+6%), iron ore (+9%) and coal (+4%). Accordingly, the terms of trade look to have risen by around 3% over the December quarter. The income deficit improved by 5.2% (or by $848m) in Q4 to -$15.318bn.
From a volume perspective, which removes the impact of price changes, exports declined by 0.7%q/q and imports increased slightly by 0.1%q/q. With import volumes higher than export volumes in Q4, net exports will subtract 0.2ppt from GDP growth according to the ABS.
For Government Finance, growth in underlying public demand was 1.6% in Q4 to $112.322bn to be 6.1% higher over the year. Within this, government consumption expenditure increased by 1.8%q/q (+5.6%Y/Y) and investment ex-transfers lifted by around 0.8%q/q (+8.1%Y/Y). Public demand will add around 0.3ppt to Q4 GDP growth.
Balance of Payments, Government Finance — Q4 | Insights
The detail from these releases was mixed, with net trade set to weigh more heavily on growth than had been expected, though on the other hand public demand appears to have come in above expectations. Late last week, the median market expectation for GDP growth in Q4 was +0.5% (+2.7%Y/Y) according to Bloomberg. Since then, most forecasters have lowered their expectations for the quarter to around 0.2% to 0.4%. The Q4 National Accounts are scheduled to be released at 11:30am AEDT tomorrow.
