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SEPTEMBER KEY FIGURES

		Jun Qtr 2004	Sep Qtr 2004	Jun Qtr 2004 to Sep Qtr 2004
		$m	$m	% change
TREND ESTIMATES
Balance on current account		-12,436	-13,013	-5
Balance on goods and services		-6,010	-6,083	-1
Net income		-6,341	-6,848	-8
SEASONALLY ADJUSTED
Balance on current account		-11,761	-13,685	-16
Balance on goods and services		-5,514	-6,384	-16
Net income		-6,213	-7,184	-16
ORIGINAL
Balance on current account		-11,840	-15,177	-28
Balance on capital and financial account		11,478	15,512	35
Levels at end of period
Net international investment position (IIP)		498,808	523,535	5
	Net equity	105,126	117,313	12
	Net debt	393,682	406,221	3

Current Account, Main aggregates - Trend estimates at current prices

International Investment, Levels at end of period

SEPTEMBER KEY POINTS


BALANCE OF PAYMENTS

• The current account deficit, seasonally adjusted, rose $1,924m (16%) to $13,685m. The deficit on the balance of goods and services rose $870m (16%) to $6,384m. The income deficit rose $971m (16%) to $7,184m, due mainly to increases in both direct investment and portfolio investment income on equity debits.
• In seasonally adjusted chain volume terms there was an increase of $1,652m (16%) in the deficit on goods and services. This could be expected to contribute -0.8 percentage points to growth in the September quarter 2004 volume measures of GDP.

• Australia's net IIP rose $25b to a net liability of $524b. Net foreign debt was $406b, an increase of $13b, mostly due to net debt inflows of $17b offset by exchange rate changes of -$4b, consistent with the appreciation of the Australian dollar. Net equity rose $12b, to a net liability of $117b.

Table 35 summarises revisions, in original current price terms, since the last issue of this publication, for the last three years and six quarters. Incorporation of the latest survey and administrative data has resulted in revisions to the current account back to September quarter 2000, decreasing the 2003-04 current account deficit by $53m. The financial account was revised back to June quarter 2003. International investment position was revised back to September quarter 2003, decreasing Australia's net IIP liability as at 30 June 2004 by $2,338m.

Seasonal Factors

The seasonally adjusted and trend estimates of the current account have been revised as a result of the annual seasonal reanalysis. Revised historical and new concurrent seasonal factors are available in the electronic version of this publication (see 5302.0, Table 95, for quarterly seasonal factors). Existing subscription clients to this data service should contact Kevin Yeadon on 02 6252 6255 or email <k.yeadon@abs.gov.au>

Each year a seasonal reanalysis is performed on all time series to re-estimate and assess the appropriateness of any prior corrections which have previously been applied. After the 2004 seasonal reanalysis, revisions may be observed in the seasonally adjusted and trend estimates for years impacted by the timing of Easter. This revision is due to an inappropriate Easter correction being applied historically for a small number of time series which has now been removed. The main impacts are on March and June observations in 2002, 1997, 1989, 1986 and 1978 for affected time series

Seasonal Adjustment

The seasonally adjusted and trend estimates of the current account have changed to concurrent seasonal adjustment. An explanation and description of the implications of this change were provided in the June 2004 issue of this publication.

Table changes

Some changes to the content of this publication have been introduced. An explanation and the implications of these changes are provided on page 5 of this publication.

FEATURE ARTICLES

This issue contains two feature articles

• Foreign Ownership of Equity (pages 15-20), which updates the analysis of foreign ownership of equity last published in the September 2003 issue; and
• Kangaroo Bonds (pages 21-25)

TABLES ON AUSSTATS


TABLES AVAILABLE ON AUSSTATS

Data available on the ABS web site <www.abs.gov.au> include:

• longer time series of all tables contained in this publication
• additional tables as listed below:

52 International investment position by net foreign equity and net foreign debt - Financial year

53 International investment position by foreign assets and foreign liabilities - Financial year

56a Goods and services: chain volume measures, original - Financial year

56b Goods and services: implicit price deflators and chain Laspeyres price indexes, original - Financial year

56c Goods and services: terms of trade, seasonally adjusted - Financial year

58 Goods credits: original - Financial year

59 Goods debits: original - Financial year

60 Goods credits: chain volume measures, original - Financial year

61 Goods debits: chain volume measures, original - Financial year

66 Goods credits: implicit price deflators (Index numbers) - Financial year

67 Goods debits: implicit price deflators (Index numbers) - Financial year

68 Services credits: original - Financial year

69 Services debits: original - Financial year

70a Services credits: current prices and chain volume measures, original - Financial year

70b Services credits: implicit price deflators (Index numbers) - Financial year

71a Services debits: current prices and chain volume measures, original - Financial year

71b Services debits: implicit price deflators (Index numbers) - Financial year

72 Income credits: original - Financial year

73 Income debits: original - Financial year

74 Current transfers: original - Financial year

75 Capital account - Financial year

76a International investment: direct investment transactions - Financial year

76b International investment: portfolio investment transactions - Financial year

77a International investment: other investment transactions, assets - Financial year

77b International investment: other investment transactions, liabilities - Financial year

77c International investment: reserve assets transactions - Financial year

77d International investment: financial derivatives transactions - Financial year

78 International investment: foreign assets by direction and type of investment - Financial year

79 International investment: foreign liabilities by direction and type of investment - Financial year

80 International investment: Australian investment abroad - Financial year

81 International investment: foreign investment in Australia - Financial year

82 International investment: levels of Australian investment abroad - Financial year

83 International investment: levels of foreign investment in Australia - Financial year

84 International investment: foreign debt transactions - Financial year

85 International investment: foreign debt levels at the end of period - Financial year

86 International investment: interest income on foreign debt - Financial year

87 International investment: currency and residual maturity of foreign debt - Financial year

88 Balance of payments: exchange rates - Financial year

89a International investment: foreign liabilities by industry - Financial year

89b International investment: foreign assets by industry - Financial year

90a Balance of payments: gross domestic product (GDP), original - Financial year

90b Balance of payments: ratios to GDP and goods and services credits, percentage change - Financial year

94 International investment position: historical summary - Financial year

95 Quarterly combined current price seasonal adjustment factors, September 1959 to September 2004

96 International investment: gross external debt liabilities: levels - Financial year

101 Merchandise exports by SITC division on a Balance of payments basis, chain volume measures

102 Merchandise exports by SITC division on a Balance of payments basis, implicit price deflators

103 Merchandise exports by SITC division and section on a Recorded trade basis, chain volume measures

104 Merchandise exports by SITC division and section on a Recorded trade basis, implicit price deflators

105 Merchandise imports by End-Use categories on a Balance of payments basis, chain volume measures

106 Merchandise imports by End-Use categories on a Balance of payments basis, implicit price deflators

107 Merchandise imports by SITC division and section on a Recorded trade basis, chain volume measures

108 Merchandise imports by SITC division and section on a Recorded trade basis, implicit price deflators

109 Services credits and debits, confidentialised version, chain volume measures

110 Services credits and debits, confidentialised version, implicit price deflators

ANALYSIS AND COMMENTS


BALANCE OF PAYMENTS


CURRENT ACCOUNT

The trend estimate of the balance on current account for the September quarter 2004 was a deficit of $13,013m, an increase of $577m (5%) on the deficit recorded for the June quarter 2004. The main contributors to the increase in the deficit were goods debits, which rose $1,429m (4%), income debits which rose $712m (7%), services debits, which rose $135m (2%), and services credits which fell $35m, offset by increases in goods credits of $1,526m (5%), and income credits of $205m (5%).

In seasonally adjusted terms, the current account deficit rose $1,924m (16%) to $13,685m in the September quarter 2004. The net deficit on goods rose $897m (17%) to $6,147m. The net deficit on income rose $971m (16%) to $7,184m. The net services deficit fell $27m (10%) to $237m.

Goods and Services

The trend estimate of the balance on goods and services at current prices was a deficit of $6,083m, an increase of $73m (1%) on the June quarter 2004 deficit.

In seasonally adjusted current price terms, the balance on goods and services was a deficit of $6,384m. The deficit on goods was $6,147m, an increase of $897m (17%) on the deficit of $5,250m in the June quarter 2004. Higher goods imports, up $1,151m (3%), were partly offset by higher goods exports, up $254m (1%). The increase in goods debits was driven by intermediate and other merchandise goods, up $758m (5%), capital goods, up $268m (3%), other goods, up $83m (7%), and consumption goods, up $42m. The increase in goods credits was driven by non-rural goods, up $355m (2%), partly offset by rural goods, down $85m (1%) and other goods, down $16m (1%).

In seasonally adjusted volume terms, the deficit on goods and services was $12,065m, an increase of $1,652m (16%) on the $10,413m deficit recorded in the June quarter 2004. The goods deficit rose $1,744m (19%) to $10,865m. Goods credits fell $1,198m (4%) while goods debits rose $546m (1%). The net services balance was a deficit of $1,201m, a $91m (7%) decrease on the June quarter 2004 deficit of $1,292m.

The increase of $1,652m in the deficit on goods and services in volume terms could be expected to make a contribution to growth of -0.8 percentage points in the September quarter 2004 volume measures of GDP, assuming no significant revision to the GDP chain volume estimate for the June quarter 2004.

Goods and Services(a)

Rural goods (seasonally adjusted, current prices) fell $85m (1%) to $7,133m, with volumes down 4% and prices up 3%. The largest decreases were in other rural goods, down $123m (4%), with volumes down 7% and prices up 3%, and wool and sheepskins, down $83m (10%), mainly due to decreased volumes. Partly offsetting these were cereal grains and cereal preparations, up $70m (4%), with both volumes and prices up 2%.

Non-rural goods (seasonally adjusted, current prices) rose $355m (2%) to $21,450m, with volumes down 4% and prices up 6%. The largest increases were in other mineral fuels, up $379m (18%), with volumes up 8% and prices up 10%, coal, coke and briquettes, up $220m (6%), with volumes down 5% and prices up 12%, and metal ores and minerals, up $217m (5%), with volumes down 1% and prices up 6%. These were partially offset by other non-rural, down $284m (11%), with volumes down 18% and prices up 9%, and other manufactures, down $59m (2%), with volumes down 3% and prices up 1%.

Other goods (seasonally adjusted, current prices) fell $16m (1%) to $1,894m, driven by a fall in goods for processing.

General Merchandise Credits(a)

Consumption goods imports (seasonally adjusted, current prices) rose $42m to $11,481m, largely driven by a rise in volumes. The largest increases were in consumption goods n.e.s., up $162m (5%), with volumes up 4% and prices steady, food and beverages, mainly for consumption, up $42m (3%), driven by an increase in volumes of 2%, and household electrical items, up $39m (4%), with volumes up 9% and prices down 5%. Partly offsetting these increases was a fall in non-industrial transport equipment, down $210m (7%), with volumes down 6% and prices down 1%.

Capital goods imports (seasonally adjusted, current prices) rose $268m (3%) to $8,899m, with volumes up 2% and prices up 1%. The largest increases were in industrial transport equipment n.e.s., up $233m (23%), with volumes up 20% and prices up 3%, machinery and industrial equipment, up $112m (4%), driven by an increase in volumes of 4%, and telecommunications equipment, up $103m (9%), with volumes up 10% and prices down 1%. Offsetting these increases was a fall in imports of civil aircraft, down $105m (13%), with volumes down 15% and prices up 2%.

Intermediate and other merchandise goods (seasonally adjusted, current prices) rose $758m (5%) to $14,979m, largely driven by a rise in prices. The largest increases were in fuels and lubricants, up $285m (9%), with volumes down 1% and prices up 11%, processed industrial supplies n.e.s., up $203m (6%), with volumes up 4% and prices up 2%, other parts for capital goods, up $97m (4%), with volumes up 3% and prices up 1%, and parts for transport equipment, up $69m (4%) with volumes steady and prices up 4%.

Other goods (seasonally adjusted, current prices) rose $83m (7%) to $1,265m, driven by a rise in non-monetary gold, up $88m.

General Merchandise Debits(a)

Services credits, in seasonally adjusted terms at current prices, rose $86m (1%) to $8,660m, mainly due to increased prices. Services debits, in seasonally adjusted terms at current prices, rose $59m (1%) to $8,897m, with volumes down 1% and prices up 2%. The largest increase in services credits was in travel services. The largest increase in services debits was in freight transportation services, due mainly to increased freight volumes.

Implicit Price Deflator

In seasonally adjusted terms, the implicit price deflator (IPD) for total goods and services credits rose 4.2%. In original terms, it rose by 4.1%. The chain Laspeyres price index for goods and services credits rose 3.9%, indicating that the compositional effects had an upward influence on the movement in the IPD. The IPD for goods credits rose 4.9% and the IPD for services credits rose 1.5%.

The total goods and services debits IPD rose 1.8% in seasonally adjusted terms. In original terms, it rose by 1.9%. The chain Laspeyres price index for debits rose 2.3%.

IMPLICIT PRICE DEFLATOR(a)

During the September quarter 2004, the goods imports IPD (in original terms) rose 2.0% and the chain Laspeyres price index for goods imports rose 2.5%. The import price index (IPI) rose 2.6%.

Terms of trade

Australia's seasonally adjusted terms of trade rose 2.3% to 113.4, with an increase of 4.2% in the IPD for goods and services credits and a 1.8% increase in the goods and services debits IPD. The trend estimate of the terms of trade increased 7.3% to 113.4.

Income

The trend estimate of the net income deficit rose $507m (8%) to $6,848m. In seasonally adjusted terms, the net income deficit rose $971m (16%) to $7,184m.

Income credits rose $102m (2%) to $4,490m and income debits rose $1,073m (10%) to $11,674m.

In original terms, income credits fell $79m (2%) to $4,365m and income debits rose $1,479m (14%) to $12,064m.

Net Income

CAPITAL AND FINANCIAL ACCOUNT

Capital Account

In original terms, the capital account surplus was $323m, up $61m (23%) on the June quarter 2004 surplus. Capital transfer credits rose $58m (9%) to $690m, while capital transfer debits fell $2m (1%) to $354m.

Financial Account

In original terms, the balance on financial account recorded a net inflow of $15.2b, with a $16.7b inflow of debt and a $1.5b outflow of equity.

Direct investment in Australia recorded an inflow of $3.0b in the September quarter 2004, an increase of $1.6b on the June quarter inflow of $1.4b. Australia's direct investment abroad recorded an outflow of $2.0b, down from the previous quarter's outflow of $2.5b. This was the fifteenth consecutive quarterly outflow, bringing the total outflow on Australia's direct investment abroad to $67.9b since the March quarter 2001.

Portfolio investment recorded a net inflow of $22.4b, up $3.3b from the net inflow of $19.1b recorded in the June quarter 2004. Large debt security issues were made to re-finance maturing short term deposit liabilities, and to replace domestic issues with offshore issues to take advantage of interest rate differentials.

Other investment recorded a net outflow of $15.6b, up $8.6b on the net outflow of $7.0b recorded in the June quarter 2004.

Reserve assets recorded a net inflow of $7.1b, an increase of $6.2b on the previous quarter's inflow of $0.9b, due to a decrease in foreign exchange reserves.

INTERNATIONAL INVESTMENT POSITION


INTERNATIONAL INVESTMENT

Australia's net international investment position at 30 September 2004 was a net foreign liability of $523.5b, up $24.7b (5.0%) on 30 June 2004. The increase consisted of:

• net transactions of $15.2b;
• price changes of $7.1b;
• exchange rate changes of $2.1b; and
• other adjustments of $0.4b.

During the September quarter 2004, the level of net equity liabilities rose $12.2b (11.6%) to $117.3b, reflecting price changes of $7.9b and exchange rate changes of $5.6b, offset by transactions -$1.5b.