5302.0 - Balance of Payments and International Investment Position, Australia, Dec 2016 
Quality Declaration
Quality Declaration ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 28/02/2017
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ANALYSIS AND COMMENTS
In seasonally adjusted current price terms, the December quarter 2016 current account deficit was $3,853m, a fall of $6,348m (62%) on the September quarter 2016 deficit. In trend current price terms, the December quarter 2016 current account deficit was $5,437m, a fall of $4,230m (44%) on the September quarter 2016 deficit. The contributors to the current account balances, in seasonally adjusted and trend terms at current prices, are shown in the following table.
TERMS OF TRADE(footnote 1) Australia's seasonally adjusted terms of trade on net goods and services for the December quarter 2016 rose 9.1% to 102.9, with an increase of 9.4% in the implicit price deflator (IPD) for goods and services credits and an increase of 0.3% in the IPD for goods and services debits. In trend terms, the terms of trade for net goods and services rose 6.0% to 101.0. BALANCE ON GOODS AND SERVICES In seasonally adjusted chain volume terms, the balance on goods and services was a surplus of $2,124m, a rise of $700m (49%) on the September quarter 2016 surplus of $1,424m. The net surplus on goods rose $1,010m (62%) on the September quarter 2016 surplus of $1,630m. Goods credits rose $1,825m (3%) and goods debits rose $814m (1%). The net deficit on services rose $311m on the September quarter 2016 deficit of $205m. The rise in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to contribute 0.2 percentage points to growth in the December quarter 2016 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the September quarter 2016. Goods The trend estimate of net goods at current prices for the December quarter 2016 was a surplus of $3,092m, a turnaround of $4,359m on the September quarter 2016 deficit of $1,267m. In seasonally adjusted terms at current prices, net goods was a surplus of $5,450m, a turnaround of $8,284m on the September quarter 2016 deficit of $2,834m.
GOODS CREDITS The trend estimate of goods credits at current prices rose $5,196m (8%) to $70,708m in the December quarter 2016. In seasonally adjusted terms at current prices, goods credits rose $9,501m (15%) to $73,406m, with volumes up 3% and prices up 12%. Rural Goods Exports of rural goods, in seasonally adjusted terms at current prices, rose $665m (6%) to $11,269m, with volumes up 8% and prices down 2%. The main components contributing to the rise were:
Non-rural Goods Exports of non-rural goods, in seasonally adjusted terms at current prices, rose $9,775m (21%) to $57,287m, with volumes up 3% and prices up 18%. The main components contributing to the rise were:
Net Exports of Goods Under Merchanting Net exports of goods under merchanting, in seasonally adjusted terms at current prices, fell $4m (20%), with volumes down 26% and prices up 8%. Non-monetary Gold Non-monetary gold, in original and seasonally adjusted terms at current prices, fell $936m (16%), with volumes down 9% and prices down 8%. GOODS DEBITS The trend estimate of goods debits at current prices rose $838m (1%) to $67,617m in the December quarter 2016. In seasonally adjusted terms at current prices, goods debits rose $1,217m (2%) to $67,956m, with volumes up 1% and prices up 1%. Consumption Goods Imports of consumption goods, in seasonally adjusted terms at current prices, fell $59m to $23,583m. The main component contributing to the fall was non-industrial transport equipment, down $149m (3%), with volumes down 2%. Partly offsetting this fall was textiles, clothing and footwear, up $100m (2%), with volumes up 4% and prices down 1%. Capital Goods Imports of capital goods, in seasonally adjusted terms at current prices, rose $1,044m (7%) to $16,760m, with volumes up 8% and prices down 2%. The main components contributing to the rise were:
Intermediate and Other Merchandise Goods Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $713m (3%) to $26,210m, with prices up 3%. The main components contributing to the rise were:
Non-monetary Gold Imports of non-monetary gold, in original and seasonally adjusted terms at current prices, fell $481m (26%), with volumes down 19% and prices down 8%. SERVICES The trend estimate of net services at current prices was a deficit of $641m, a fall of $320m (33%) on the September quarter 2016 deficit of $961m. In seasonally adjusted terms at current prices, net services was a deficit of $782m, a rise of $78m (11%) on the September quarter 2016 deficit of $704m.
Services Credits Services credits, in seasonally adjusted terms at current prices, rose $166m (1%) to $18,414m, with volumes up 1%. The main components contributing to the rise were:
Partly offsetting these rises was other services, down $58m (1%), with volumes down 1%. In seasonally adjusted terms, tourism related services credits rose $197m (2%) to $11,995m. Services Debits Services debits, in seasonally adjusted terms at current prices, rose $244m (1%) to $19,196m, with volumes up 2% and prices down 1%. The main components contributing to the rise were:
In seasonally adjusted terms, tourism related services debits rose $15m to $10,289m. PRIMARY INCOME The trend estimate of the net primary income deficit at current prices rose $439m (6%) to $7,454m in the December quarter 2016. In seasonally adjusted terms at current prices, the net primary income deficit rose $1,843m (30%) to $8,081m in the December quarter 2016. Primary Income Credits Primary income credits, in seasonally adjusted terms at current prices, rose $829m (5%) to $16,665m. The main component contributing to the rise was direct investment assets, income on equity and investment fund shares, up $509m (7%). Primary Income Debits Primary income debits, in seasonally adjusted terms at current prices, rose $2,672m (12%) to $24,746m. The main component contributing to the rise was direct investment liabilities, investment income on equity and investment fund shares, up $1,436m (19%). SECONDARY INCOME The trend estimate of the net secondary income deficit at current prices rose $9m (2%) to $434m in the December quarter 2016. In seasonally adjusted terms at current prices, the net secondary income deficit rose $14m (3%) to $439m in the December quarter 2016. CAPITAL ACCOUNT In original terms, the capital account deficit was $140m, an increase of $40m (40%) on the September quarter 2016 deficit of $100m. Capital account credits decreased $30m and capital account debits increased $10m (8%) in the December quarter 2016. FINANCIAL ACCOUNT The balance on the financial account, in original terms, recorded a net inflow of $3.4b, which was driven by a net inflow of equity of $29.7b and a net outflow of debt of $26.4b. The financial account surplus decreased $8.5b (72%) from $11.8b to $3.4b in the December quarter 2016. Direct Investment Direct investment recorded a net inflow of $21.1b in the December quarter 2016, an increase of $10.4b on the net inflow of $10.8b in the September quarter 2016, where:
Portfolio Investment Portfolio investment recorded a net inflow of $16.6b in the December quarter 2016, a turnaround of $28.4b on the net outflow of $11.8b in the September quarter 2016, where:
Financial Derivatives Financial derivatives recorded a net outflow of $0.2b in the December quarter 2016, a decrease of $3.4b on the net outflow of $3.6b in the September quarter 2016. Other Investment Other investment recorded a net outflow of $22.9b in the December quarter 2016, a turnaround of $38.5b on the net inflow of $15.7b in the September quarter 2016. This was driven by net outflows in loans of $13.2b and in currency and deposits of $4.9b. Reserve Assets Reserve assets recorded an outflow of $11.3b in the December quarter 2016, a turnaround of $12.1b on the inflow of $0.8b in the September quarter 2016. INTERNATIONAL INVESTMENT POSITION (IIP) Australia's net IIP liability position was $1,021.6b at 31 December 2016, a decrease of $19.8b (2%) on the revised 30 September 2016 position of $1,041.4b. Australia's net foreign debt liability decreased $25.6b (2%) to $1,023.1b. Australia's net foreign equity asset decreased $5.8b (80%) to $1.4b at 31 December 2016. The changes contributing to this result are shown in the following table.
SUPPLEMENTARY INFORMATION CONDITIONS The conditions in the global economy showed modest growth in Australia’s major trading partner countries in the December quarter 2016. According to the Organisation for Economic Cooperation and Development (OECD)(footnote 2) , preliminary growth rates compared to last quarter in seasonally adjusted terms showed quarterly growth for China (1.7%), Indonesia (1.2%), UK (0.6%), USA (0.5%), Euro 28 (0.5%) and South Korea (0.4%).
The Australian share market, as measured by the MSCI global index(footnote 3) , increased 5.4% in December quarter 2016, following an increase of 3.8% in September quarter 2016. Increases were recorded in Japan (14.9%), France (9.4%), Germany (8.1%), Canada (4.8%), the UK (3.4%), the USA (3%), Singapore (1.5%) and Switzerland (0.8%). Decreases were recorded in Hong Kong (9.3%), New Zealand (7.1%) and Europe ex. UK (0.4%). A market price change of -$17.7b was recorded for foreign equity assets and $18.3b in foreign equity liabilities in the December quarter 2016. According to Bloomberg(footnote 4) , the composite corporate benchmark yield increased in the USA from 2.87% to 3.42%, the UK from 1.99% to 2.35%, Germany from 0.70% to 0.93%, Japan from 0.18% to 0.25%, and Australia from 2.93% to 3.54%. The long-term 10 year government bond yields increased in the USA from 1.60% to 2.45%, the UK from 0.75% to 1.24%, Germany from -0.19% to 0.11% and Japan from -0.08% to 0.05% over the December quarter 2016. In Australia, the rate increased from 1.99% to 2.79%. A market price change of $2.4b was recorded for portfolio debt securities assets and -$23.3b in portfolio debt securities liabilities in the December quarter 2016. The Australian dollar depreciated against the majority of the major currencies in the December quarter 2016. The Australian dollar depreciated 5.16% against the US dollar, 5.15% against the Hong Kong dollar, 3.25% against the Indian rupee, 2.79% against the Canadian dollar, 2.34% against the Taiwan dollar, 2.08% against the Thai baht, 1.94% against the Indonesian rupiah, 1.19% against the Chinese renminbi and 0.83% against the New Zealand dollar. It appreciated 9.52% against the Japanese yen, 4.3% against the South Korean won, 2.71% against the Malaysian ringgit, 1.03% against the Euro, 0.51% against the Singapore dollar, 0.18% against the Swiss franc and 0.1% against the UK pound sterling. The Trade-weighted Index (TWI)(footnote 4,footnote 5) remained unchanged at 63.90 in the December quarter 2016. These movements were reflected in exchange rate changes for foreign assets of -$44.4b and foreign liabilities of $38.0b in the December quarter 2016. RELATIONSHIP BETWEEN IPD, EPI AND IPI(footnote 6) In original terms, the IPD for total goods credits rose 12.7% and the chain Laspeyres price index for goods exports rose 13.1%. The Export Price Index (EPI)(footnote 7) rose 12.4% during the December quarter 2016. In original terms, the IPD for total goods debits rose 0.7% and the chain Laspeyres price index for goods imports rose 0.3%. The Import Price Index (IPI)(footnote 7) rose 0.2% during the December quarter 2016. Differences between the IPD and International Trade Price Indexes can arise due to a number of methodological factors including differences in pricing points, timing, coverage and weights.
Commodity Price Indexes The RBA Commodity Price Index (average monthly index) for rural commodities decreased 3.2% between the September quarter 2016 and the December quarter 2016 while the EPI for rural goods decreased 1.9%. The RBA Commodity Price Index for non-rural commodities increased 18.7% while the EPI for non-rural goods total (excluding non-monetary gold) increased 18.0%. Differences between the RBA Commodity Price Index and ABS price measures are largely a consequence of methodological differences used in the construction of the respective indexes, including coverage of included commodities and timing of source data. CALENDAR YEAR 2016 SITUATION CURRENT ACCOUNT In original terms, the balance on current account in 2016 was a deficit of $44.3b, a decrease of $33.4b (43%) on the deficit of $77.8b recorded in 2015. The balance on goods and services was a deficit of $14.2b, a decrease of $22.8b (62%) on the deficit of $37.0b recorded in 2015. The 2016 goods deficit of $9.3b was a decrease of $16.1b (63%) on the deficit of $25.4b in 2015. The 2016 services deficit of $4.9b was a decrease of $6.7b (57%) on the deficit of $11.6b in 2015. The 2016 net primary income deficit decreased $10.5b (27%), with an increase in primary income credits of $11.4b (22%) and an increase in primary income debits of $0.9b (1%). The 2016 net secondary income deficit decreased $0.2b (10%), with an increase in secondary income credits of $0.1b (1%) and a decrease in secondary income debits of $0.1b (1%). FINANCIAL ACCOUNT The balance on financial account recorded a net inflow of $44.9b, with a net inflow on equity of $47.5b and a net outflow on debt of $2.6b. This result was a decrease of $26.8b on the net inflow of $71.8b recorded for the previous year as a result of:
INTERNATIONAL INVESTMENT POSITION Australia's net international investment position as at 31 December 2016 was a net foreign liability of $1,021.6b. This was an increase of $60.9b (6%) on the position a year earlier as a result of:
During 2016, Australia's net foreign equity decreased $60.0b (98%) on the previous year, to a net asset position of $1.4b, with net transactions of $47.5b and exchange rate changes of $39.5b partly offset by other changes of -$16.0b and price changes of -$11.0b. Australia's net foreign debt liability increased $0.9b on the previous year, to a net liability position of $1,023.1b, with other changes of $7.8b and price changes of $1.3b partly offset by exchange rate changes of -$5.6b and net transactions of -$2.6b. At 31 December 2016, the ratio of Australia's net international investment position to GDP using the latest available GDP figure (for the year ended 30 September 2016 using current prices) was 61.3%. This compares with 58.8% one year ago. 1 In this commentary movements in indexes are based on data to four decimal places. <back 2 OECD Statistics Quarterly National Account, Organisation for Economic Cooperation and Development – Economic Department, viewed 15 February 2017. <back 3 MSCI Global Market Indexes 2016, Morgan Stanley Capital International, viewed 10 January 2017. <back 4 Bloomberg, Bloomberg Professional Service, viewed 13 January 2017. <back 5 Exchange Rates – Daily 2014 to Current, Reserve Bank of Australia - Statistical Tables, viewed 16 January 2017. <back 6 In this commentary movements in indexes are based on data to four decimal places. <back 7 Source: International Trade Price Indexes, Australia (cat. no. 6457.0). <back Document Selection These documents will be presented in a new window.
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