As per the recent data released by Australian Bureau of Statistics, nation’s current account deficit has contracted to $10.7 billion for June-September quarter 2018, against the $13.5 billion in the previous quarter. The figures were quite close to market expectations of $10.2 billion.
Exports of goods and services figures were reported at $3,390 million, a rise of 3% as against rising import value of $688 million, up by 1%. The high export figures were attributed by continued rise of mineral fuels such as natural gas.
ABS figures suggest some respite on the Balance of Payments account side, with the rise of $2704 million in the goods and services surplus ($6607 million) higher than the widening of $1162 million in net primary income deficit ($16,911). The trade surplus increased $1,603 million, widening the surplus to $2,853 million, based on seasonally adjusted chain volumes.
The decrease of $ 17.3 million in Australia's net international investment liability is worth appreciating, from $957.5 billion in June quarter to $940.2 billion in the September quarter.
Positive Q3 export data was expected to make some positive contribution to GDP figures. In sharp contrast, nation’s economy slowed sharply as depicted by 0.3% rate against the expectation of 0.6%, slowing from a 0.9 % growth in the June quarter.
As on 5th December 2018, Australian dollar was seen to be trading at 73 US cents as against 81 US cents in the beginning of year, representing a steep fall of 10 per cent. The S&P/ASX 200 Index tumbled to a 23-month low at its opening and was down by 44.7 points, or 0.79 per cent, at 5713.1, at its close. In contrast, it has now been 28 months since the RBA has adjusted its monetary policy and has left the cash rate on hold at 1.5.
Alternatively, current account deficit is also characterized by excess of national investments over national savings. With a household savings rate of 2.4% on account of mounting household debt, lower interest rates and reduced savings, the deficit is expected to widen in coming future.
The foreign capital inflow also faces a bleak future with US economy going with higher interest rates as part of monetary tightening measures and investors thereby moving their funds in US market.
Analysts are keeping a close eye on the growing tension between two global superpowers, China and US, over South China sea clash and trade tariff war. The global volatility, slowdown in Chinese economy and Aussie’s political stand against China’s global trade practices, are likely to have cascading impact on Australia’s current account balance and national income. The contribution of net exports to GDP is likely to disappoint in future.
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