The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

3 June 2008

NO.064

Balance of Payments – March Quarter 2008

Today's Balance of Payments shows a widening in the current account deficit in the March quarter to $19.5 billion, representing 7.0 per cent of December quarter nominal GDP.

The widening in the current account deficit in the quarter was driven by a widening trade deficit, partly offset by a narrowing of the net income deficit. The rise in the trade deficit reflects growth in import volumes more than offsetting growth in export volumes.

The terms of trade increased as a result of higher commodity export prices, in particular stronger world oil and gold prices also resulted in higher import prices, dampening the terms of trade rise.

In the seven years since the March quarter 2001, export volumes have grown annually at an average of 1.8percent, compared to 6.6 per cent growth over the preceding seven years. This slowdown in export volumes growth has occurred despite strong world growth over this period.

Export volumes increased by 0.5 per cent in the March quarter, to be 2.7 per cent higher through the year. All components of exports except services increased in the quarter. Exports of rural commodities and elaborately transformed manufactures recorded the largest increases, both rising by 1.3 per cent. Exports of non-rural commodities increased by 0.8 per cent, with coal exports being adversely affected by the Queensland floods. Services exports fell by 1.0 per cent.

Import volumes rose by 3.5 per cent in the quarter to be 11.5percent higher through the year. All import components rose in the quarter, with capital goods recording particularly strong growth. The strength in capital imports was largely driven by the machinery and industrial equipment, and civil aircraft components.

The terms of trade rose by 1.1 per cent in the March quarter to be 1.1 per cent higher through the year. The March quarter terms of trade outcome does not incorporate any recently settled contract price rises for bulk commodities. These contract prices come into effect from 1 April 2008.

Net foreign debt rose to $616.1 billion in the March quarter, representing 56.7 per cent of year‑ended December quarter 2007 nominal GDP. Australia's debt servicing ratio – the percentage of export earnings required to meet Australia's debt servicing repayments – fell in the March quarter to 11.3 per cent.

The Rudd Labor Government's economic strategy is squarely focussed on lifting the productive capacity of the economy and international competitiveness to strengthen our export performance.

3 June 2008