NO.074

BALANCE OF PAYMENTS AND INVESTMENT POSITION – JUNE QUARTER 2004

Today’s balance of payments data show that Australia posted a current

account deficit of $12.0 billion or an estimated 5.9 per cent of GDP in

the June quarter 2004.

Exports rose by 1.8 per cent in the June quarter to be 7.9 per cent higher

through the year. Rural exports rose by a strong 12.5 per cent, continuing

the recovery from the 2002-03 drought. Services exports fell by 3.1 per

cent, but remain 12.7 per cent higher than a year ago. Imports increased

by 2.0 per cent in the June quarter in line with strong growth in domestic

demand.

The terms of trade increased by 2.1 per cent in the June quarter, to be

11.2 per cent higher through the year.

Australia’s net foreign debt rose to $393.5 billion or 49.6 per

cent of GDP. The general government accounted for a modest 5.0 per cent

of net foreign debt in the June quarter 2004. Australia’s ability

to service its net foreign debt is strong, with the debt servicing ratio

falling to 8.5 per cent in the June quarter.

The Budget outlook is for a stronger world economy to provide a renewed

source of growth for domestic economic activity in 2004-05. The current

account deficit is expected to narrow in 2004-05, primarily reflecting an

improvement in Australia’s terms of trade. The stronger world economy

will underpin growth in exports of non-rural commodities, manufactures and

services. The large grain harvest in 2003 04 has contributed to a build-up

in farm stocks, which will provide continuing support to rural exports into

2004-05.

CANBERRA

30 August 2004

Contact: David Alexander

02 6277 7340