ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

The trend estimate of the balance on current account for the March quarter 2009 was a deficit of $3,676m in current price terms. This was a decrease of $2,691m (42%) on the deficit recorded for the December quarter 2008 where:

• the goods and services surplus rose $2,091m (52%) to $6,112m
• the income deficit fell $634m (6%) to $9,602m
• the current transfers deficit rose $34m (22%) to $186m.

In seasonally adjusted current price terms, the current account deficit fell $1,743m (27%) to $4,614m between the December quarter 2008 and March quarter 2009 where:

• the goods and services surplus rose $900m (22%) to $5,075m
• the income deficit fell $862m (8%) to $9,498m
• the current transfers deficit rose $18m (10%) to $190m.

Goods and Services

The trend estimate of the balance on goods and services at current prices was a surplus of $6,112m, an increase of $2,091m (52%) on the December quarter 2008 surplus.

In seasonally adjusted terms, the balance on goods and services was a surplus of $5,075m, an increase of $900m (22%) on the December quarter 2008 surplus where:

• the net goods surplus rose $260m (6%) to $4,626m
• there was a turnaround in net services of $639m resulting in a surplus of $448m.

The increase in the seasonally adjusted goods surplus resulted from the decrease in goods debits (imports), down $6,557m (11%) outweighing the decrease in goods credits (exports), down $6,297m (10%).

Contributing to the decrease in goods credits was non-rural goods, down $8,109m (15%) in seasonally adjusted terms, partly offset by increases in rural goods, up $341m (4%) and in all other goods, up $1,471m (30%).

Contributing to the decrease in seasonally adjusted goods debits were:

• intermediate and other merchandise goods, down $5,371m (20%)
• consumption goods, down $1,276m (8%)
• capital goods, down $695m (5%).

Partly offsetting these decreases was a rise in seasonally adjusted other goods, up $785m (21%).

The surplus on services of $448m was a turnaround of $639m on the December quarter 2008 deficit of $191m. Services credits rose $351m (3%) and services debits fell $289m (2%).

In seasonally adjusted volume terms, the deficit on goods and services was $908m, a decrease of $5,964m (87%) on the $6,872m deficit recorded in the December quarter 2008. The net deficit on goods fell $5,674m (73%) to $2,118m. Goods credits rose $1,218m (3%) and goods debits fell $4,456m (9%). The net services balance was a surplus of $1,209m, an increase of $288m (31%) on the December quarter 2008.

The decrease of $5,964m in the deficit on goods and services in seasonally adjusted volume terms is expected to add 2.2 percentage points to growth in the March quarter 2009 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the December quarter 2008.

Goods Credits

The trend estimate of goods credits rose $362m (1%) to $62,451m in the March quarter 2009.

In seasonally adjusted terms at current prices, goods credits fell $6,297m (10%) to $59,241m.

Exports of rural goods, in seasonally adjusted terms at current prices, rose $341m (4%) to $7,964m, with volumes up 18% and prices down 12%. The increases were in:

• cereal grains & cereal preparations, up $388m (24%), with volumes up 56% and prices down 21%
• other rural, up $87m (3%), with volumes up 13% and prices down 9%.

Exports of non-rural goods, in seasonally adjusted terms at current prices, fell $8,109m (15%) to $44,835m, with volumes down 1% and prices down 14%. The largest decreases were in:

• coal, coke and briquettes, down $5,309m (29%), with volumes down 13% and prices down 19%
• other mineral fuels, down $1,466m (23%), with volumes up 3% and prices down 26%
• metals (excluding non-monetary gold), down $780m (23%), with prices down 23%
• transport equipment, down $369m (23%), with volumes down 25% and prices up 2%
• other non-rural (including sugar and beverages), down $191m (6%), with volumes up 5% and prices down 11%.

Partly offsetting these decreases was the metal ores and minerals component, up $316m (2%) with volumes up 7% and prices down 4%.

Exports of other goods, in seasonally adjusted terms at current prices, rose $1,471m (30%) to $6,443m. The main contributor to this increase was the non-monetary gold component, up $1,467m (34%), with volumes up 14% and prices up 18%.

Goods Debits

The trend estimate of goods debits fell $1,441m (2%) to $56,553m in the March quarter 2009.

In seasonally adjusted current price terms, goods debits fell $6,557m (11%) to $54,615m.

Imports of consumption goods, in seasonally adjusted terms at current prices, fell $1,276m (8%) to $14,852m, with volumes down 10% and prices up 3%. All components contributed to this fall with the largest decrease in the non-industrial transport equipment component, down $965m (26%) with volumes down 29% and prices up 4%.

Imports of capital goods, in seasonally adjusted terms at current prices, fell $695m (5%) to $13,480m, with volumes down 7% and prices up 2%. A change in the classification of civil aircraft and other commodities subject to confidentiality restrictions has contributed to an increase in capital goods n.e.s. (up $465m) and a decrease in civil aircraft (down $450m). These two series should be interpreted with caution. For further details refer to 'Goods Debits Confidentiality: Changes to Import Confidentiality Restrictions'.

The largest decreases in other capital components were in:

• industrial transport equipment n.e.s., down $518m (28%), with volumes down 32% and prices up 6%
• ADP equipment, down $388m (18%), with volumes down 17% and prices down 2%.

Partly offsetting these decreases was the increase in the telecommunications equipment component, up $189m (12%), with volumes up 12% and prices down 1%.

Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, fell $5,371m (20%) to $21,716m, with volumes down 10% and prices down 11%. All components contributed to this fall with the largest decreases in:

• fuels and lubricants, down $2,356m (30%), with volumes down 2% and prices down 29%
• processed industrial supplies n.e.s., down $1,018m (16%), with volumes down 12% and prices down 5%
• iron and steel, down $650m (35%), with volumes down 34%
• parts for transport equipment, down $427m (18%), with volumes down 20% and prices up 3%
• organic and inorganic chemicals, down $328m (21%), with volumes down 19% and prices down 3%.

Imports of other goods, in seasonally adjusted terms at current prices, rose $785m (21%) to $4,567m. The largest increase was in the non-monetary gold component, up $593m (19%), with volumes up 3% and prices up 16%.

Services

The trend estimate of net services at current prices was a surplus of $214m, a turnaround of $288m on the revised December quarter 2008 deficit of $74m.

In seasonally adjusted terms at current prices, net services recorded a surplus of $448m, a turnaround of $639m on the December quarter 2008 deficit of $191m.

Services credits, in seasonally adjusted terms at current prices, rose $351m (3%) to $13,846m, with volumes up 2%. The increases were in:

• travel services, up $282m (4%), with volumes up 3%
• other services, up $80m (2%), with volumes up 2% and prices up 1%.

Partly offsetting these increases was the transportation services component, down $11m (1%), with volumes up 1% and prices down 1%.

Services debits, in seasonally adjusted terms at current prices, fell $289m (2%) to $13,397m, with prices down 2%. The transportation services component was down $789m (18%), with volumes down 15% and prices down 3%.

Partly offsetting the fall in transportation services were:

• other services, up $463m (10%), with volumes up 12% and prices down 1%
• travel services, up $37m (1%), with volumes up 3% and prices down 2%.

Seasonally adjusted, tourism related services credits rose $331m (4%) to $8,873m, and tourism related services debits decreased $77m (1%) to $6,159m.


IMPLICIT PRICE DEFLATOR*

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits fell 9.9%. In original terms, it decreased 9.2% and the chain Laspeyres price index for goods and services credits fell 9.0%. In original terms, the IPD for goods credits fell 10.9% and the IPD for services credits rose 0.3%.

The total goods and services debits IPD fell 2.3% in seasonally adjusted terms. In original terms, it fell 1.9% and the chain Laspeyres price index for goods and services debits fell 2.8%. In original terms, the IPD for goods debits fell 1.7% and the IPD for services debits fell 2.5%.

Relationship to IPI and EPI*

In original terms, the implicit price deflator (IPD) for total goods credits fell 10.9% while the chain Laspeyres price index for goods exports fell 10.8%. The export price index (EPI) fell 4.6% during the March quarter 2009. The difference between the IPD and the EPI is driven by the coal, coke and briquettes component, with the IPD for coal, coke and briquettes decreasing 18.8% and the EPI rising 5.2%. The difference in the two measures results from differences in coverage, pricing points and revisions.

In original terms, the implicit price deflator for total goods debits fell 1.7% while the chain Laspeyres price index for goods imports fell 2.9%. The import price index (IPI) fell 2.8% during the March quarter 2009.


Terms of Trade*

Australia's seasonally adjusted terms of trade fell 7.8% to 109.1, with a decrease of 9.9% in the IPD for goods and services credits and a decrease of 2.3% in the goods and services debits IPD. The trend estimate of the terms of trade decreased 3.7% to 113.6.

* In this commentary movements in indexes, other than EPI and IPI, are based on data to four decimal places.


Income

The trend estimate of the net income deficit decreased $634m (6%) to $9,602m in the March quarter 2009.

In seasonally adjusted terms the net income deficit decreased $862m (8%) to $9,498m. Income debits decreased $1,846m (9%) to $19,277m and income credits decreased $985m (9%) to $9,778m. The main contributors to the decrease in income debits were: a $1,071m (14%) decrease in direct investment in Australia, income on equity; a $334m (14%) decrease in portfolio investment liabilities, income on equity; and a $196m (16%) decrease in income on other investment liabilities. The main contributors to the decrease in income credits were: a decrease of $304m (5%) in direct investment abroad, income on equity; a $234m (11%) decrease in portfolio investment assets, income on debt; and a $228m (27%) decrease in income on other investment assets.

In original terms the net income deficit fell $908m (9%) to $9,278m in the March quarter 2009. Income credits decreased $544m (5%) to $9,776m. Income debits decreased $1,452m (7%) to $19,054m.

Current Transfers

In seasonally adjusted terms, the net current transfers deficit was $190m, an increase of $18m (10%) on the $172m deficit recorded in December quarter 2008. Current transfer credits fell $29m (2%) and current transfer debits fell $11m (1%) in the March quarter 2009.


CAPITAL AND FINANCIAL ACCOUNT

Capital Account

In original terms, the capital account surplus was $927m, up $567m (158%) on the December quarter 2008 surplus. Capital transfer credits rose $304m (31%) to $1,279m and capital transfer debits fell $19m (5%) to $352m. Net acquisition/disposal of non-produced, nonfinancial assets was balanced after a deficit of $244m in December quarter 2008.


Financial Account

The balance on financial account recorded a net inflow of $3.8b, with a $16.4b inflow of equity and a $12.6b outflow of debt.

The financial account surplus fell by $3.6b from $7.4b in the December quarter 2008 to $3.8b in the March quarter 2009 in line with the fall in the current account deficit from $7.3b last quarter to $4.2b this quarter.

Net transactions in long term debt issues by Australian depository corporations rose, from $4.2b in December quarter 2008 to $23.8b in the March quarter 2009, while net transactions in short term debt maturities by Australian depository corporations fell from $49.7b in December quarter 2008 to $10.5b in March quarter 2009.

Direct investment in Australia recorded an inflow of $4.9b in the March quarter 2009, a decrease of $18.5b on the December quarter 2008 inflow of $23.4b. Australia's direct investment abroad recorded an outflow of $14.3b, a decrease of $7.0b on the previous quarter's outflow of $7.3b. In net terms, direct investment recorded an outflow of $9.3b in the March quarter 2009, a turn around of $25.4b compared to an inflow of $16.1b in the December quarter 2008.

Portfolio investment recorded a net inflow of $36.2b, a turnaround of $44.1b on the net outflow of $7.9b in the December quarter 2008. This was driven by an increase of $16.3b in portfolio investment debt securities liabilities and $15.2b in portfolio investment equity securities liabilities.

Other investment recorded a net outflow of $22.7b, a turnaround of $23.1b on the net inflow of $0.4b in the previous quarter.

Reserve assets recorded a net outflow of $1.8b, a decrease of $0.4b on the previous quarter's net outflow of $2.2b.


INTERNATIONAL INVESTMENT POSITION


INTERNATIONAL INVESTMENT

Australia's net international investment position at 31 March 2009 was a net foreign liability of $734.6b, up $20.8b (3%) on 31 December 2008. The increase consisted of:

• price changes of $15.4b
• net transactions of $3.8b
• exchange rate changes of $1.7b.

During the March quarter 2009 Australia's net foreign equity liability increased $41.9b (226%) to $60.5b. The increase was due to price changes of $20.0b, net transactions of $16.4b and exchange rate changes of $5.2b.

Australia's net foreign debt liability decreased $21.1b (3%) to $674.2b. The decrease was due to net transactions of -$12.6b, price changes of -$4.6b and exchange rate changes of -$3.4b.