Today's Balance of Payments figures show that despite global financial turbulence and slower global growth, Australia is continuing to benefit from strong demand for our exports, with commodity prices at generational highs.
The June quarter Balance of Payments shows a substantial narrowing in the current account deficit to $12.8 billion in the June quarter, representing 4.5 per cent of March quarter nominal GDP. This is the lowest current account deficit (as a proportion of GDP) since the September quarter 2002.
The narrowing of the current account deficit was driven by a strong turnaround in the trade balance, which recorded a small surplus in the June quarter. This is the first quarterly trade surplus since the March quarter 2002. The turnaround in the trade balance largely reflects a sharp increase in the price of coal and iron ore exports.
The terms of trade rose to a record high as a result of higher commodity prices, although higher world oil prices dampened the terms of trade rise.
Export volumes increased by 2.7 per cent in the June quarter, to be 6.1 per cent higher through the year. All components of exports increased, led by a strong rise in rural commodities, followed by elaborately transformed manufactures, services and non-rural commodities.
Import volumes growth slowed from 4.3 per cent in the March quarter to 2.2 per cent in the June quarter, to be 13.0 per cent higher through the year.
The terms of trade rose by 13.1 per cent in the June quarter to be 15.6 per cent higher through the year. This is the largest quarterly increase in the terms of trade in 35 years. Export prices rose by 13.6 per cent in the quarter, while import prices rose by 0.5 per cent.
Net foreign debt fell to $600 billion in the June quarter, representing 54.2 per cent of yearended March quarter 2008 nominal GDP. Australia's debt servicing ratio - the percentage of export earnings required to meet Australia's debt servicing repayments - fell in the June quarter to 11.9 per cent.
The Rudd Government is focused on addressing capacity constraints, boosting productivity and lifting international competitiveness so we can strengthen our export performance for the long term.