The outlook for Australia’s June quarter GDP report just got a little brighter following the release of Balance of Payments and government expenditure figures today.
According to the ABS, net exports will add 0.3 percentage points to quarterly GDP, topping the median economist forecast for a decline of 0.1 percentage points.
“In volume terms, exports grew faster than imports this quarter,” said the ABS, noting that this is “expected to contribute 0.3 percentage points to growth in the June quarter 2017 volume measure of GDP, assuming no significant revision to the GDP chain volume estimate for the March quarter 2017.”
With market expectations centred around an increase in real GDP of 0.7% before today’s report, that suggests quarterly growth could now top 1%.
However, while exports grew faster than imports in volume terms during the quarter, weaker commodity prices saw the size of Australia’s current account deficit expand to $9.562 billion in seasonally adjusted terms, larger than the $8 billion level that had been expected by economists.
It was also well above the $4.754 billion deficit recorded in the March quarter.
The ABS said that Australia’s goods and services surplus narrowed to $3.07 billion in seasonally adjusted terms, less than half the $7.403 billion level reported in the previous quarter.
Taking into account both price and volume changes, exports fell by $2.693 billion while imports grew by $1.64 billion.
The slide in the size of the goods and services surplus reflected lower commodity prices during the quarter, and saw Australian terms of trade fall 6% to 103.6.
Terms of trade is the value of Australia’s exports divided by its imports over a specific period, then multiplied by 100.
Along with the narrowing in the goods and services surplus, the ABS said that Australia’s primary income deficit widened by $499 million to $12.16 billion in the quarter.
The primary income account shows income flows between residents and non-residents over the quarter.
The ABS also said that government consumption and investment also increased during the June quarter, another positive sign before the release of Australia’s GDP report tomorrow.
In seasonally adjusted chain volume terms, consumption expenditure increased by $946 million.
Reflecting increased infrastructure spending, total government investment surged by $2.984 billion over the same period, nearly 20% higher than the previous quarter.
Combined with the surprise boost provided by net exports, it’s now looking like the Australian economy rebounded strongly in the June quarter following a weather-disrupted start to the year.
Financial markets certainly think so with the Australian dollar sharply higher, and government bonds slightly weaker, following the release of today’s reports.