The current account results for the third quarter were largely positive. The highlight being a surplus increase to $23.9billion. This was driven by a 1% increase in exports and a decrease in imports due to continued lockdowns. The resulting surplus was 4.5% of GDP, the largest surplus as a share of the economy on record.
This result was the 10th consecutive quarterly current account surplus. Driving factors behind this hot streak include higher commodity prices helping boost exports by 16.3% since January 2019 and imports decreasing by 6.7% during the same period, largely due to the impact of continued lockdowns and the effects this creates notably for industries such as education, tourism, and retail.
Terms of trade plays an important role in creating trade surpluses. Currently terms of trade are 23% higher for the year and 68% higher than the long run average.
One issue is worth discussing. Export volumes have essentially stayed still for the past year and remain lower than prior to COVID. Therefore, it can be determined that all the growth in exports can be attributed to an increase in terms of trade/export prices. Inevitably, there is a risk that if commodity prices were to decrease and lower the terms of trade this streak may end abruptly.
The breakdown between sectors shows that in Q3:
- resource shipments rose by 3%
- capital goods exports up by 4.4%
- service imports down 8.2%
For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au
Source: Westpac