Today’s balance of payments data show that Australia posted a current account deficit of $12.0 billion or an estimated 5.9 per cent of GDP in the June quarter 2004.
Exports rose by 1.8 per cent in the June quarter to be 7.9 per cent higher through the year. Rural exports rose by a strong 12.5 per cent, continuing the recovery from the 2002-03 drought. Services exports fell by 3.1 per cent, but remain 12.7 per cent higher than a year ago. Imports increased by 2.0 per cent in the June quarter in line with strong growth in domestic demand.
The terms of trade increased by 2.1 per cent in the June quarter, to be 11.2 per cent higher through the year.
Australia’s net foreign debt rose to $393.5 billion or 49.6 per cent of GDP. The general government accounted for a modest 5.0 per cent of net foreign debt in the June quarter 2004. Australia’s ability to service its net foreign debt is strong, with the debt servicing ratio falling to 8.5 per cent in the June quarter.
The Budget outlook is for a stronger world economy to provide a renewed source of growth for domestic economic activity in 2004-05. The current account deficit is expected to narrow in 2004-05, primarily reflecting an improvement in Australia’s terms of trade. The stronger world economy will underpin growth in exports of non-rural commodities, manufactures and services. The large grain harvest in 2003 04 has contributed to a build-up in farm stocks, which will provide continuing support to rural exports into 2004-05.