Balance of Payments - Government Finance — Q4 | By the numbers
- Australia's current account surplus stepped down sharply to $0.955bn in Q4; a downside surprise on the consensus forecast of $2.3bn (prior rev: $6.503bn from $7.855bn)
- The trade surplus pulled back from its record high in Q3 ($19.914bn revised down from $21.065bn) to $13.893bn in Q4.
- The income deficit was narrowed by 4.8% in Q4 (or by $0.626bn) to -$A12.498bn (prior rev: -$13.124bn from -$13.033bn)
- Net exports are expected to add 0.1ppt to GDP growth in Q2, which was below the median estimate for +0.2ppt
- In the separately released Government Finance data, the ABS reported underlying public demand lifted by 0.3% to $118.17bn.
Balance of Payments - Government Finance — Q4 | The details
The nation posted its third consecutive surplus on current account for the first time since the early 1970s, though at $0.955bn in Q4 it was well down from the surpluses in Q2 of $4.58bn (0.9% of nominal GDP) and Q3 $6.5bn (1.3% of nominal GDP).
The nation posted its third consecutive surplus on current account for the first time since the early 1970s, though at $0.955bn in Q4 it was well down from the surpluses in Q2 of $4.58bn (0.9% of nominal GDP) and Q3 $6.5bn (1.3% of nominal GDP).
Driving this result was a pullback in the quarterly trade surplus from $19.9bn to $13.9bn as export earnings contracted by 4.5% in Q4 (+5.6%yr), with the weakness centred on non-rural goods (-6.2%qtr) reflecting declines in key commodity prices. Rural goods lifted by 7.1%, possibly due to the impact of higher prices in response to drought conditions. Earnings from services exports were up only modestly (0.5%qtr) compared with a 2.6% rise in Q3, with this area one to follow to gauge the impact of bushfires and the coronavirus going forward. Import spending lifted by 0.3% in Q4 to be up by 1.2% through the year. Consumption goods saw a 0.6% rise in the quarter and 3.0%yr, likely reflecting the impact of a weaker Australian dollar. Spending on capital goods was up by 2.7% in Q4 but was soft through the year (0.3%).
From a volume perspective, exports were flat (0.0%) in Q4 but a base effect saw annual growth rise from 2.9% to 3.4%, while import volumes fell by 0.5% in the quarter as the decline in annual terms steepened from -0.9% to -1.5%, broadly reflective of soft domestic demand conditions. As a result, the ABS reported that net exports are expected to contribute 0.1ppt to GDP growth in Q4.
Government spending lifted by 0.7% in Q4 to $94.3bn, though investment spending ex-asset transfers fell by 1.3% in the quarter to $23.9bn. Overall, the ABS reported that government spending would add around 0.1ppt to Q4 GDP growth, but that investment would not subtract significantly.
Balance of Payments - Government Finance — Q4| Insights
In recent quarters, economic activity has been bolstered by net exports and public demand, but that dynamic looks to be a touch softer in Q4. The market forecast for Q4 GDP growth is around 0.4%, though the risks appear to the downside.