In: Business and Management

Submitted By yelhsa
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Current account deficit narrows sharply
September 1, 2008 - 4:58PM A record improvement in Australia's current account balance from surging commodity prices is unlikely to boost economic growth in the June quarter, economists say. The current account deficit (CAD) narrowed by a record $7.068 billion in the June quarter to a seasonally adjusted $12.774 billion, the Australian Bureau of Statistics (ABS) said. The 36 per cent contraction in the CAD was the sharpest quarterly shrinkage since the ABS series began in 1959. The balance of payments data also produced the first trade surplus since the March quarter of 2002 - while the terms of trade, the ratio of export to import prices, posted the biggest quarterly surge in 35 years. ANZ economist Alex Joiner said higher commodity prices caused the narrowing of the current account balance in the June quarter. "With export volumes weak, the improvement in the CAD was driven entirely by our booming terms of trade," he said. "That was basically on the back of what we are calling the second wave of the commodity price boom." Australia's terms of trade, the ratio of export to import prices, climbed by 13.1 per cent in the June quarter, which was the biggest quarterly increase since March 1973. This happened as export prices jumped by 13.6 per cent, compared with a 0.5 per cent rise in import prices. Commonwealth Bank of Australia chief economist Michael Blythe said the narrowing of Australia's CAD, based on surging resources prices, was unlikely to boost Australia's economic growth in the June quarter. "In terms of our import and export volumes, they are both growing at about the same rate and it looks like they will make a small negative contribution to GDP growth," Mr Blythe said. "It's mainly a price story at the moment." The balance of goods and services, the difference…...

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