Balance of Payments and International Investment Position, Australia

• In seasonally adjusted chain volume terms, the surplus on goods and services rose $4,982m to $15,630m in the June quarter 2020. This is expected to contribute 1.0 percentage points to growth in the June quarter 2020 volume measure of GDP.

• Australia's net IIP liability position was $910.6b at 30 June 2020, an increase of $59.3b on the revised 31 March 2020 position of $851.3b.
• Australia's net foreign debt liability position decreased $75.2b to $1,093.5b.
• Australia's net foreign equity asset position decreased $134.4b to $182.9b at 30 June 2020.
   

International Accounts uses the concurrent seasonal adjustment method, meaning that seasonal factors are re-estimated each time new data becomes available. If not appropriately accounted for, unusual events, such as COVID-19, can distort estimates calculated using this method. From March quarter 2020, seasonal factors for series that have been notably impacted by COVID-19 will be calculated using data up to and including December quarter 2019, then projected from March quarter 2020 onwards. This approach, known as the forward factor method, ensures that the seasonal factors are not distorted by COVID-19 impacts.

The ABS has advised users that it had moved to using forward factors for seasonal analysis of a number of series, including Travel Services. Current ABS (and international practice) requires at least three years of data to assess whether a change in the seasonal pattern has occurred. Should COVID-19 result in a long-term change to the seasonal pattern then revisions to these series may occur in the future. The ABS will consult with users on any future methods changes to seasonal adjustment and potential revisions.

For more information on interpreting seasonally adjusted estimates of International travel services please see the May 2020 feature article International Travel Services time series which outlines the matter in greater detail.

The trend series attempts to measure underlying behaviour of international trade activity. In the short term, this measurement will be significantly affected by the current COVID-19 pandemic and subsequent changes to regular patterns in international trade that will occur during this time. If the trend estimates in this publication were to be calculated without fully accounting for this unusual event, they would provide a misleading view of underlying international trade activity.

It may be some time before the underlying trend in international trade activity can be accurately estimated. The trend series has therefore been suspended from March quarter 2020 and will be reinstated when more certainty emerges in the underlying trend in international trade.

Quality assurance undertaken by the ABS confirmed that COVID-19 did not result in quality impacts to International Trade in Goods and Services statistics for June quarter 2020. For information on the expected economic impacts of COVID-19, please see the ABS Chief Economist Series paper Measuring natural disasters in the Australian economy.

In original current price terms, the June quarter 2020 current account surplus was $19,246m, a rise of $9,762m on the March quarter 2020 surplus. In original current price terms, the balance on goods and services was a net surplus of $24,646m, primary income was a net deficit of $4,618m and secondary income was a net deficit of $782m.

In original current price terms, the June quarter 2020 capital and financial account deficit was $18,636m, a rise of $7,787m on the March quarter 2020 deficit. In original current price terms, the capital account was a net deficit of $219m and the financial account was a net deficit of $18,417m.

The contributors to the current account balances, in original terms at current prices, are shown in the following table.

In seasonally adjusted current price terms, the June quarter 2020 current account surplus was $17,738m, a rise of $8,715m on the March quarter 2020 surplus.

The contributors to the current account balance, in seasonally adjusted at current prices, are shown in the following table.

Australia's seasonally adjusted terms of trade on net goods and services for the June quarter 2020 remained steady at 107.4, with a decrease of 1.2% in the implicit price deflator (IPD) for goods and services credits and a decrease of 1.7% in the IPD for goods and services debits.

In seasonally adjusted chain volume terms, the balance on goods and services was a surplus of $15,630m, a rise of $4,982m on the March quarter 2020 surplus of $10,648m.

The net surplus on goods fell $1,086m on the March quarter 2020 surplus of $8,651m. Goods credits fell $2,805m (3%) and goods debits fell $1,718m (2%). The net surplus on services rose $6,068m on the March quarter 2020 surplus of $1,998m.

The rise in the balance on goods and services surplus, in seasonally adjusted chain volume terms, is expected to contribute 1.0 percentage points to growth in the June quarter 2020 chain volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the March quarter 2020.

In seasonally adjusted terms at current prices, net goods was a surplus of $16,958m, a fall of $2,270m on the March quarter 2020 surplus of $19,228m.

In seasonally adjusted terms at current prices, net services was a surplus of $6,903m, a turnaround of $6,989m on the March quarter 2020 deficit.

In seasonally adjusted terms at current prices, the net primary income deficit fell $4,320m (44%) to $5,583m in the June quarter 2020.

Primary income credits, in seasonally adjusted terms at current prices, fell $2,931m (16%) to $15,200m. The main components contributing to the fall were:

• compensation of employees, down $341m (50%)
• investment income, direct investment assets, income on equity and investment fund shares, down $1,430m (24%)
• investment income, portfolio investment assets, income on equity and investment fund shares, down $1,028m (12%)
• investment income, other investment assets, down $136m (10%).

Primary income debits, in seasonally adjusted terms at current prices, fell $7,251m (26%) to $20,782m. The main components contributing to the fall were:

• compensation of employees, down $931m (51%)
• investment income, direct investment liabilities, income on equity and investment fund shares, down $2,189m (18%)
• investment income, portfolio investment liabilities, income on equity and investment fund shares, down $3,265m (53%)
• investment income, other investment liabilities, down $176m (8%).

In seasonally adjusted terms at current prices, the net secondary income deficit rose $325m to $541m in the June quarter 2020.

In original terms, the capital account deficit was $219m, a decrease of $315m on the March quarter 2020 deficit of $534m. Capital account credits remained steady and capital account debits decreased $345m in the June quarter 2020.

The balance on the financial account, in original terms, recorded a net outflow of $18.4b, which was driven by a net outflow of debt of $50.1b and a net inflow of equity of $31.7b.

The financial account deficit increased $8.1b from $10.3b in the March quarter 2020, to $18.4b in the June quarter 2020.

Australia's net IIP liability position was $910.6b at 30 June 2020, an increase of $59.3b on the revised 31 March 2020 position of $851.3b. Australia's net foreign debt liability position decreased $75.2b to $1,093.5b. Australia's net foreign equity asset position decreased $134.4b to $182.9b at 30 June 2020.

The conditions in the global economy showed a significant decline in growth in the majority of Australia’s major trading partner countries in the June quarter 2020. 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 Spain (-18.5%), France (-13.8%), Belgium (-12.2%), Canada (-12.0%), EU 27 (-11.9%), Germany (-10.1%), USA (-9.5%), Indonesia (-6.9%), South Korea (-3.3%) and China (11.5%).

• Foreign asset transactions recorded an inflow of $156.2b in the June quarter 2020 compared to an outflow of $43.7b in the March quarter 2020.
• Foreign liability transactions recorded an outflow of -$174.6b in the June quarter 2020 compared to an inflow of $33.4b in the March quarter 2020.
   

The Australian share market, as measured by the MSCI global index (footnote 3), increased 14.3% in the June quarter 2020, compared to a decrease of 24.3% in the March quarter 2020. Increases were recorded in Brazil (29.7%), Germany (21.7%), the USA (21.2%), India (20.2%), New Zealand (17.9%), China (14.2%), Canada (14.2%), France (12.6%), Japan (11.4%), UK (7.8%), Hong Kong (7.6%), Switzerland (7.5%) and Singapore (5.1%). A market price change of -$143.1b was recorded for foreign equity assets and $118.5b for foreign equity liabilities in the June quarter 2020.

According to Thomson Reuters (footnote 4), the composite corporate benchmark yields decreased in the USA from 3.77% to 2.26%, Germany from 1.78% to 0.91%, the UK from 2.49% to 1.67% and Australia from 2.05% to 1.80% over the June quarter 2020. Whereas the composite corporate benchmark yield increased in Japan from 0.48% to 0.52% over the June quarter 2020. The long-term 10 year government bond yields decreased in the UK from 0.36% to 0.17%, the USA from 0.70% to 0.66% and Germany from -0.46% to -0.50% over the June quarter 2020. Whereas the long-term 10 year government bond yields increased in Australia from 0.89% to 0.92% and Japan from 0.02% to 0.03% over the June quarter 2020. A market price change of -$6.9b was recorded for portfolio investment debt securities assets and $10.0b in portfolio investment debt securities liabilities in the June quarter 2020.

The Australian dollar appreciated against most major and minor trading currencies in the June quarter 2020. The Australian dollar appreciated 16.09% against the South African rand, 11.59% against the UK pound sterling, 11.14% against the US dollar, 11.11% against the Indian rupee, 11.09% against the Hong Kong dollar, 10.86% against the Chinese renminbi, 10.61% against the Japanese yen, 9.03% against the European euro, 8.88% against the Singapore dollar, 7.07% Canadian dollar and 4.35% against the New Zealand dollar. The Trade Weighted Index (TWI) (footnote 5) rose 9.69% to 60.00 in the June quarter 2020. These movements were reflected in exchange rate changes for foreign assets of $195.2b and foreign liabilities of -$113.4b in the June quarter 2020.

The following goods component has been revised since the release of the June 2020 issue of International Trade in Goods and Services, Australia (cat. no. 5368.0).

• capital goods n.e.s. component of goods debits, revised in the June quarter 2020.
   

Table 28 summarises revisions, in original current price terms, since the last issue of this publication.

Incorporation of the latest survey and administrative data has resulted in revisions to the balance of payments series back to the September quarter 2016. In original current price terms, these revisions have:

• increased the current account deficit for September quarter 2016 by $19m
• decreased the current account deficit for December quarter 2016 by $28m
• increased the current account deficit for March quarter 2017 by $25m
• decreased the current account deficit for June quarter 2017 by $6m
• increased the current account deficit for September quarter 2017 by $104m
• increased the current account deficit for December quarter 2017 by $98m
• increased the current account deficit for March quarter 2018 by $181m
• increased the current account deficit for June quarter 2018 by $286m
• increased the current account deficit for September quarter 2018 by $208m
• increased the current account deficit for December quarter 2018 by $236m
• increased the current account deficit for March quarter 2019 by $103m
• increased the current account surplus for June quarter 2019 by $12m
• increased the current account surplus for September quarter 2019 by $184m
• increased the current account surplus for December quarter 2019 by $863m
• increased the current account surplus for March quarter 2020 by $235m.
   

The International Investment Position (IIP) has been revised back to the September quarter 2016. These revisions have increased Australia's net IIP liability $43,251m to a net liability position of $851,329m at 31 March 2020. The financial account deficit has been revised down $1,098m to $10,315m at 31 March 2020.

Seasonally adjusted and trend series have been revised due to the incorporation of revised estimates and the incorporation of estimates for the latest quarter.

In seasonally adjusted terms, the revisions decreased the volume surplus on goods and services by $271m for the March quarter 2020.

Data in this issue aligns with the data in the June quarter 2020 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) to be released on 2 September 2020.

The seasonally adjusted and trend estimates of goods, services, primary income and secondary income will be revised in the September quarter 2020 issue of this publication as a result of the annual seasonal re-analysis. This re-analysis reviews the seasonal and trading day factors in more detail than is possible in the quarterly processing cycle and assesses the appropriateness of any prior corrections.

A new base year 2018-19 will be introduced into chain volume estimates and implicit price deflators in the September quarter 2020 issue. As a result, the chain volume estimate series and implicit price deflators series will be re-referenced to 2018-19.

Goods credits data presented in this publication are based on information provided by exporters to the Department of Home Affairs (Home Affairs). At the time of initial reporting to Home Affairs, the final prices at which transactions take place are not known for some commodities. Final quantity and/or unit price information is updated progressively in international merchandise trade data as exporters revise the information provided to Home Affairs.

For commodities such as iron ore and coal, newly negotiated contract prices are not fully reflected in data first reported to Home Affairs. When additional information on quantity and/or unit price for these commodities is available, the ABS may adjust the data to reflect actual transaction values.

Iron ore adjustments are applied on an international merchandise trade basis at the Australian Harmonized Export Commodity Classification (AHECC) level. Coal, coke and briquettes are adjusted on a balance of payments basis in original current price terms. When actual final transaction prices become available estimates are replaced with these data.

In most instances, transfer of ownership occurs when goods cross the customs frontier. In certain circumstances the ownership of large value capital expenditure items can occur prior to the items crossing the customs frontier. The ABS may adjust the relevant balance of payments series to record the timing when transfer of ownership was effected.

Iron ore (in original terms)

• adjustments have been applied to iron ore lump in the the December quarter (+$25m) 2019 and the June quarter (+$145m) 2020. Adjustments have been applied to iron ore fines in the December quarter (+$45m) 2019, the March quarter (+$35m) and the June quarter (+$225m) 2020, When actual final transaction prices become available estimates are replaced with these data.
   

Coal (in original terms)

• adjustments have been applied to coal, coke and briquettes in the balance of payments series for the March quarter (-$15m) and the June quarter (+$1,105m) 2020. All previous adjustments have been removed.
   

Capital expenditure (in original terms)

• the balance of payments goods debits component capital goods n.e.s. includes an estimate of expenditure on capital goods that have changed ownership but have not yet crossed the customs frontier.

In response to the global COVID-19 crisis the ABS has released a new publication, International Merchandise Trade, Preliminary, Australia (cat. no. 5368.0.55.024). This release provides preliminary estimates for Australian international merchandise (goods) trade on a monthly basis to help measure the economic impact of COVID-19. These estimates are compiled from administrative data (customs records) sourced from the Department of Home Affairs and are subject to revision. This publication will run monthly until further notice. The final monthly estimates will be published in International Trade in Goods and Services, Australia (cat. no. 5368.0). For more information on the range of additional products released by the ABS to help assess the impact of COVID-19 please see the COVID-19: Additional products to measure the impact page.

This release previously used catalogue number 5302.0.