Australia: Current account deficit narrowed further in Q1 2017 to $3.1bn - Westpac

Australia’s current account deficit narrowed further in Q1 2017, from $3.5bn (previously $3.9bn) to $3.1bn seasonally adjusted while as a share of GDP (0.7%), it is the smallest deficit since 1979 points out Elliot Clarke, Research Analyst at Westpac.

Key Quotes

“On an unadjusted basis (which all financial account data is reported on), the narrowing in Q1 was very similar, from $4.1bn to $3.5bn.”

“For portfolio investment, a net outflow of $3.3bn was recorded, as Australian’s equity and debt investment offshore more than offset new foreign investment in Australia. On the latter, while foreigners increased their stock of Australian portfolio equity investments in Q1 ($9.1bn), our net portfolio debt liabilities fell $4.3bn, bringing the cumulative decline since the beginning of 2016 to $24bn. This decline comes as a result of reduced foreign issuance and ownership of Australian financial and corporate debt. It must however be noted that only equates to a fifth of the $147bn increase in Australia’s portfolio debt liabilities in 2014 and 2015.”

“Having seen robust inflows over the first nine months of 2016 ($65bn), other investment (deposits & loans) saw a second consecutive net outflow in Q1 2017, a modest $2.4bn. Together with the more sizeable Q4 2016 outflow of $20bn, this offset a third of the inflow seen during the prior nine months.”

“The international investment position (IIP). Transactions added $3.8bn to Australia’s net international liability position in Q1 2017, $15bn in equity inflows largely offset by an $11bn debt outflow. The 5.6% rise in AUD/USD increased our liability position by $21bn in Q1, as the Australian dollar value of our equity assets fell; however, price changes largely offset (–$24bn). Australia’s IIP stands at 59.6% of GDP.”

“The net primary income deficit (NID), the income flows related to our foreign assets and liabilities, has turned higher of late as Australian corporate profits and consequent distributions to foreign owners rebounded. Currently it stands at 2.7% of GDP, up from a cycle (and 24-year) low of 1.5% in Q1 2016.”