Analysts were on the money with their expectation that Australia’s current account deficit would widen sharply in the second quarter of 2015 data released this morning by the Australian Bureau of Statistics showed.
The balance on current account, which summarises transactions between Australian residents and those with the Australia’s trading partners showed the biggest deficit since December 2009 with a print of $19.033 billion.
That was well above the top of market forecasts and a significant $5.5 billion deterioration on the first quarter deficit.
“The deficit on the balance of goods and services rose $4,860m (102%) to $9,641m in the June quarter 2015. The primary income deficit rose $715m (9%) to $8,966m,” the Bureau said.
Not only is the data much worse than forecast the Bureau also said it had found an error in its calculation of the primary income debits “by more than $1.0b in the September quarter 2013, March quarter 2014, September quarter 2014 and March quarter 2015.”
What’s important about the deficit, and the numbers that are used to calculate it, is that they feed directly into net exports. That’s one of the key components of the GDP calculation.
That matters because CommSec has said that “net exports will cut GDP growth by 0.6 percentage points”.
AMP’s chief economist Shane Oliver told Business Insider that even though the blowout in the in the June quarter current account had been flagged by monthly trade data it had “in the event turned out to be far worse than expected.”
Oliver said there was now “a very high risk that June quarter GDP data to be released tomorrow will show that the economy has contracted”.
“The poor current account/trade figures highlight just how tough the situation is that Australia has now found itself. My view remains that the RBA will have to cut the cash rate again (albeit that’s very unlikely today) and the $A is on its way in the $US0.60,” he said.
Recent days have shown a growing number of analysts seeing the potential for a negative number in the Q2 GDP data. It’s out at 11.30am Sydney time on Wednesday.