CANBERRA: Australia’s trade position has collapsed dramatically, with the June quarter current account deficit blowing out 41 per cent to $19 billion. The market had been expecting a deficit to widen from the previous quarter’s $13.5 billion, but the $5.5 billion deterioration was well beyond the most pessimistic forecast.
The result leaves Australia’s net foreign debt hovering just below $1 trillion. Net foreign debt now stands at $976 billion. The current account is a measure of the net sum of imports and exports, as well the so-called invisibles such as net interest and dividend payments from abroad.
Citi economist Josh Williamson said the figures would cut a larger than expected 0.6 per cent from GDP figures which will be released on Wednesday. However today’s data was not all bad news for GDP. Mr Williamson noted that public sector demand and an increased expenditure on defence were the main factors that could stop the economy contracting in the June quarter.
“Government consumption increased by 2.2 per cent in the June quarter from more defence spending that was probably related to operational expenses in the Middle East conflict,” he said. The deficit on balance on goods and services doubled from $4.7 billion in the March quarter to $9.6 billion, while the net income position fell 9 per cent to $9 billion.
On the trade front, aggregate export volumes sank 4 per cent over the quarter with a marked weather related decline in coal exports being a significant drag. Iron ore volumes were also down marginally, although they remain close to all-time highs.
