Interpac Business and Migration Solutions Melbourne Australia

(November 30, 2010)

AUSTRALIA'S current account deficit has widened because of a deterioration in the nation's trading conditions.

Export volumes in the September quarter failed to keep pace with the previous three months, and will be a drag on economic growth when the national accounts are released tomorrow.

The Australian Bureau of Statistics said the current account widened to a deficit of $7.8 billion in the three months to the end of September, compared with a revised $5.4 billion deficit in the June quarter.

Economists' forecasts had centred on a $6.7 billion deficit.

Exports are expected to subtract 0.4 percentage points from tomorrow's gross domestic product (GDP), although smaller than economists' expectations for a detraction of 0.8 percentage points.

However, Nomura Australia chief economist Stephen Roberts said the balance of payments data was good news.

"The net result is, exports of goods and services, instead of detracting upwards of minus 0.8 percentage points of GDP will only detract 0.4 per cent from GDP tomorrow.

"There was a bit more widening in nominal terms in the current account deficit but the volume didn't deteriorate as much as some of us expected.

"Also, there it was recently positive on the Government transactions as well and they are going to contribute a positive 0.2 percentage points which is probably a bit of a surprise to some as well.

"So the net result is that after having figures that look as if the GDP number was going to be softer, these ones sort of counter that to a degree and it still looks as if it's going to be a positive GDP reading, probably not quite as weak as some had revised it to."

The smaller than expected detraction from exports will partly offset the poor run of quarterly outcomes over the past week, including weak construction, engineering expenditure, company profits and business inventories.

Prior to today's data, economists' forecasts had centred on a 0.5 per cent rise in the September quarter, recoiling from the solid 1.2 per cent growth in the previous three months.

(Source:news.com.au)