Net primary income deficit also expands for a second straight quarter
Australia’s current account balance declined by $4.4 billion to a deficit of $10.7 billion in the June quarter of 2024, according to data released by the Australian Bureau of Statistics (ABS).
The latest figure reflects the largest current account deficit since the June quarter of 2018.
“This quarter’s current account deficit was the largest since June quarter 2018, reflecting continued falls in bulk commodity prices and higher income paid to non-residents,” said Tom Lay, ABS head of International Statistics.
The balance on goods and services dropped by $3.9 billion to $12.0 billion, while the net primary income deficit increased by $0.5 billion to $22.5 billion. Exports of goods fell by 4.4%, driven by lower prices for iron ore and coal.
“Iron ore and coal prices saw a second quarterly fall, which is reflected in goods export prices 5.4 per cent lower compared to this time last year,” Lay said.
The ABS figures also showed a decline in exports of cereal grains and preparations due to reduced wheat production in the 2023-24 season, following record highs in the previous two years.
Service exports partially offset the decline in goods exports, rising by 6%, led by education-related travel services. This increase was attributed to higher average spending by non-residents after two quarters of weakness.
Goods imports fell by 0.6%, driven by a reduction in capital goods, particularly mining equipment. Service imports increased by 1.1%, driven by a rise in other services and increased spending on travel as Australians travelled longer and spent more.
Australia’s terms of trade fell by 3% from the previous quarter and were down 3.8% from the June quarter of 2023. The decline was largely due to a 3% fall in export prices, while import prices remained unchanged.
The net primary income deficit widened for the second consecutive quarter, as higher interest payments on Australia’s debt liabilities and a rebound in dividends paid to overseas investors drove up outflows.
The financial account recorded a surplus of $9.4 billion, driven by net inflows of debt ($9.1 billion) and equity ($0.2 billion). Australia’s net international investment liability position decreased by $21.3 billion to $720 billion, the lowest level since June 2009.
“Australia’s net international investment liability position, which is the amount that Australia owes to the rest of the world, fell to its lowest level since June quarter 2009,” Lay said. “This was primarily due to Australia’s net foreign equity assets rising by $35.1 billion to $546.5 billion, reflecting continued growth in overseas equity markets.
“Rising values in international share markets benefited Australian equity investment, notably the assets of Australian superannuation funds.”
However, this was partially offset by a $13.8 billion increase in net foreign debt liabilities as domestic borrowers sought additional funding in overseas debt markets.
The $1.1 billion rise in net trade is expected to contribute 0.2 percentage points to the June quarter 2024 gross domestic product.
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