Australia's current account surplus came in lower than expected but remained elevated in the March quarter. Import volumes rebounded in Q1 and prices fell, reflective of improved supply chain pressures. The domestic services sector continues to be supported by the post-pandemic recovery in tourism and education.
- Australia's current account surplus increased to $12.3bn in Q1, lower than expected ($15bn) from a downwardly revised $11.7bn in Q4.
- The trade surplus widened to $41.1bn in the quarter from $39bn in Q4. Export earnings lifted by 0.4% to $176.1bn and import spending declined by 0.9% to $135.1bn.
- The income deficit was wider at $28.5bn in Q1 from $27bn in the previous quarter.
- Net exports are expected to deduct 0.2ppt from Q1 real GDP.
Balance of Payments — Q1 | The details
Broadly offsetting movements in the trade surplus and income deficit saw the nation's current account surplus remaining elevated at around 1.9% of GDP (nominal) in the March quarter.
The trade surplus widened by 5.2% to $41.1bn in Q1 - its second highest level on record - on the back of higher income from exports (up 0.4%) and lower spending on imports (down 0.9%), due to prices falling 3.8%.
A 5.9% increase saw the income deficit widen to $28.5bn. Outflows to foreign investors eased in Q1 reflecting falls in commodity prices, but income from foreign investments also fell.
In volume terms, exports continued to advance posting a 1.8% rise in the March quarter, but this was outpaced by a rebound in imports, which lifted by 3.2%. The ABS reports this dynamic will deduct 0.2ppt from Q1 GDP growth. Exports still remain around 4% below their pre-pandemic level, compared to imports which are almost 7% higher than at the end of 2019.
Rising exports continued to be supported by services (7.7%), a major contributor to economic growth over the past year on reopened borders. Rural goods rebounded (6.5%) to hit a new record high on strong global demand for Australian produce. Resources exports were soft (-0.7%) on declines in coal and metals shipments, weighing on non-rural goods (-0.8%).
Imports, which were coming off a 4% fall into year-end, rebounded by 3.2% in the March quarter. Both goods (3.3%) and services (3.1%) picked up after falling in Q4. The goods component was boosted by the consumption category (4.9%) on surging vehicle imports and by capital goods (5.2%), indicative of eased supply chain disruptions.
Services imports have lost momentum over recent months but were 3.1% higher in Q1. In contrast inbound travel - supported by education and tourism - has seen services exports continue to accelerate.
Balance of Payments — Q1 | Insights
A smaller-than-expected headwind to quarterly GDP from net exports limits some of the downside risk to economic growth in the March quarter (expected at around 0.3%). Reopened borders continue to boost exports, while eased supply chain pressures appeared to drive a rebound in imports. The current account surplus remains at a historically elevated level on the back of a surge in the terms of trade (up 2.8% in Q1) over recent years as commodity prices accelerated coming out of the pandemic.
