Australia's current account deficit widened to $16.6bn in the September quarter (-$13bn expected) while deficits in recent quarters swelled following revisions. Over the past couple of years, export revenue has been affected by volatility in commodity prices while import spending has been rising. This has seen the trade surplus narrow significantly from elevated levels, falling to a 7-year low ($2.5bn) in the quarter. Import volumes (1.5%) outpaced growth in exports (1%) in Q3, with net exports expected to deduct 0.1ppt from quarterly GDP growth.
The nation's current account deficit was $16.6bn in the September quarter (around 2.4% of GDP), widening from $16.2bn in the June quarter. The current account has been in deficit since the middle of 2023, exposed by a narrowing trade surplus and large income deficits.
As noted earlier, volatility in commodity prices over the past couple of years has weighed on the nation's export revenue. At the same time, imports have remained on an upward trajectory. The trade balance is still in surplus (more is earned from exports than is spent on imports denominated in $A); however, surpluses (grey bars in chart below) have declined significantly, down from a peak of $41.4bn in the middle of 2022 to just $2.5bn in the latest quarter. That is a fraction of the primary income deficit (-$18.7bn), which is leading to this run of current account deficits.
In Q3, export revenue lifted by 0.9%, driven by a 1% rise in underlying volumes as prices eased by 0.1%. Goods exports (1.3%) led the way on the back of major resources (1.5%), notably coal (6.9%), while services stalled (0%). Over the past year, however, services (9.2%) have dominated goods (2.3%), as the large inflow of overseas arrivals have boosted the tourism and education sectors.
For imports, the total spend was up 1.1% in the quarter, with volumes lifting 1.5% to more than offset cheaper prices (-0.4%). Goods (2.1%) were again the key driver, with services falling (-0.2%). Capital goods lifted sharply (6.7%) to drive import volumes, and this lines up with the acceleration seen in business investment in the quarter. This came on the back of increased orders for aircraft (236%), ADP equipment (data servers etc) (13.5%), and machinery and equipment (6%). Meanwhile, intermediate goods (4.2%) lifted as fuel imports surged (9.8%).
Overall, with import volumes (1.5%) exceeding exports (1%), the read-through is negative for GDP growth (imports deduct from a nation's GDP). The ABS reported that net exports (exports - imports) is expected to reduce Q3 GDP by 0.1ppt.
