Balance of Payments - Government Finance — Q1 | By the numbers
- Australia's current account surplus surged past expectations coming in at $8.395bn in Q1 (consensus f/c $6.1bn) up sharply from $1.722bn in Q4 (revised from $0.955bn).
- The trade surplus more than recovered its sharp decline from Q4 (-33.7%) with a 41.5% lift in the March quarter to $19.188bn (prior rev: $13.560bn).
- The income deficit narrowed by 7.2% in Q1 (or by $0.822bn) to -$A10.162bn (prior rev: -$11.434bn).
- Net exports are expected to add 0.5ppt to GDP growth in Q1.
- In the separately released Government Finance data, the ABS reported underlying public demand lifted by 1.4% to $119.96bn.
Balance of Payments - Government Finance — Q1 | The details
Australia's run of current account surpluses has extended out to a fourth consecutive quarter — the last time this occurred was back in 1972-73 — rising sharply from $1.7bn to $8.4bn in the March quarter.
Australia's run of current account surpluses has extended out to a fourth consecutive quarter — the last time this occurred was back in 1972-73 — rising sharply from $1.7bn to $8.4bn in the March quarter.
Driving this strong increase was a 41.5% escalation in the trade surplus in Q1 to $19.2bn on weak details. Export earnings fell by 1.2% in the quarter (-0.6%yr), while import spending contracted by a sharp 6.6% (-5.5%yr) reflecting ongoing weakness in domestic demand conditions, now accentuated by the COVID-19 crisis.
On a volume basis, exports pulled back by 3.5% in Q1 and turned negative over the year (-2.0%) for the first time since mid-2011. The key theme here was the capitulation in services (-12.8%qtr, -7.9%yr), which captures the effects of the loss of tourism from overseas visitors due to COVID-19. Goods exports were also a little soft (-0.7%qtr, -0.3%yr) with iron-ore volumes (-1.8%qtr) showing the impact of cyclone-related disruptions, though other commodities (inc coal and LNG) lifted.
Imports fell by a sharp 6.2% in the quarter as the decline in annual terms accelerated from -1.2% to -7.7%. This was driven by a 10.4% fall in capital goods, as well as the impact of restrictions placed on overseas travel. The overall analysis is that net exports will contribute 0.5ppt to GDP growth in Q1.
The income deficit fell by $822m in the March quarter, with primary income credits advancing by 1% as income debits fell by 2%.
In the government finance release, underlying public demand lifted by 1.4% in the March quarter to $119.96bn, with consumption spending up by 1.8% to $96.1bn and investment flat at $23.8bn. Overall, the ABS reported public demand will add around 0.3ppt to GDP growth in Q1.
Balance of Payments - Government Finance — Q1 | Insights
The detail across both net exports was a little stronger than most had anticipated as far as GDP purposes go. This may limit the downside for Q1's economic growth outcome to be reported in tomorrow's national accounts, though a contraction is still more likely than not.