In the December quarter 2020, Australia’s Current account had its seventh consecutive quarterly surplus increasing $3.8 billion to $14.5 billion (seasonally adjusted) according to latest figures from the Australian Bureau of Statistics (ABS). This increase was mainly driven by an increase in the goods and services surplus.
Balance of Payments components
The balance on goods and services surplus in the December quarter 2020 was $18.1 billion, a rise of $4.4 billion on the September quarter 2020 surplus. Exports of goods and services rose $7.9 billion (8 per cent), while imports of goods and services rose $3.5 billion (4 per cent). The deficit on net primary income increased to $3.2 billion in the December quarter 2020, up $0.4 billion on the September quarter 2020 (see graph 1: Current account, main aggregates).
Andrew Tomadini, head of International Statistics at the ABS said: “Australia’s seventh consecutive quarterly Current account surplus, in the December quarter 2020, was driven by strong exports of Australia’s metal ores (up $3.7 billion) and cereal grains (up $1.3 billion) on the back of favourable growing conditions in late 2020. Imports grew in December quarter 2020 driven by increased demand for consumption goods, while the Australian Government’s instant asset write-off appears to have increased demand for capital goods such as industrial transport equipment, capital goods nes and machinery equipment”.
The Financial account deficit increased by $4.3 billion to $9.8 billion in the December quarter 2020, driven mainly by Australian funds continuing to increase investment activity in overseas markets (see graph 2: Australian holdings of foreign equity – portfolio). This follows the March and June quarters of 2020 which saw superannuation funds, in particular, selling off foreign equity holdings to provide liquidity for the COVID-19 Early release of superannuation program. The increase in December quarter 2020 was partially offset by strong foreign investment in Australian government securities. The Financial account deficit and the offsetting valuation increases of $7.3 billion, resulted in Australia’s net International Investment liability position decreasing by $2.4 billion to $947.2 billion at 31 December 2020.
Contribution to Gross Domestic Product
In seasonally adjusted chain volume terms, the balance on goods and services surplus decreased $0.5 billion, narrowing the surplus to $11.8 billion. Assuming no significant revision to September quarter 2020 estimates of Gross Domestic Product (GDP), the balance on goods and services is expected to detract 0.1 percentage points from December quarter 2020 GDP.