Australian current account Q4 2017: Exports stumble - Westpac

Andrew Hanlan, Research Analyst at Westpac, notes that Australia's current account deficit (CAD) widened modestly during 2017, including in the December quarter and despite this, the deficit remains relatively well contained by historical standards.

Key Quotes

“The CAD was $14.0bn in Q4, a $3.0bn deterioration on Q3. The trade position slumped by $2.1bn while the net income deficit widened by $0.9bn to $13.9bn.”

“As a share of the economy, the CAD deficit represents 3.1% of GDP. This is a little below the decade average of 3.7% and below the post 1990s average of 4.2%, reflecting an improved trade position relative to history.”

“In Q4, the trade balance slumped from a $2.0bn surplus to a deficit of $0.1bn as export shipments stumbled.”

“Export earnings were little changed in the quarter, edging 0.1% lower. This was despite a rise in export prices, up 1.6%, boosted by higher commodity prices.”

“In Q4, the import bill increased by 2.1%. In part this was due to higher prices, up 1.5%, largely associated with the weaker currency, down 2.7% on a trade weighted basis.”

“Export volumes were the key disappointment, falling 1.8% (-$1.5bn) in Q4 to be only 0.8% above a year ago.”

“Import volumes increased by a further 0.5% to be 6.6% above the level of a year ago, to meet the needs of rising domestic demand.”

“Real net exports subtracted a sizeable 0.5ppts from growth in Q4 and subtracted a hefty 1.3ppts from activity over the past year.”

“The terms of trade stabilised in 2017, following the rebound in 2016. In Q4, the outcome was +0.1%qtr, -1.0%yr.”