The balance of payments estimates for the December quarter 1997 indicate a seasonally adjusted current account deficit of $5,736 million.

The increase in the current account deficit was caused by a turnaround in the balance of goods, from a surplus of $265 million in the September quarter to a $132 million deficit in the December quarter, and a $626 million worsening in net services. The net income deficit increased by $103 million.

The December quarter results are in line with the updated current account forecasts in the Mid Year Fiscal and Economic Outlook, which have the current account deficit expanding moderately from historically low levels.

Unlike previous experience, the present situation is accompanied by healthy positives: – negligible inflation, low interest rates, a budget moving into surplus and healthy domestic growth.

• The worsening in the balance of goods was largely due to Reserve Bank gold sales that artificially boosted the September quarter outcome. In value terms exports rose marginally (0.3 per cent), while imports rose by 4.0 per cent.
• The increase in goods credits exports reflects a rise in exports of non-rural exports as rural exports and non-monetary gold both fell.
• The fall in non-monetary gold exports reflects sales of gold (of $0.6 billion) by the Reserve Bank in the September quarter.
• The rise in imports was due rises in the imports of consumption good imports, capital good imports and imports of intermediate and other goods.

December quarter net export volumes (sa) fell from a deficit of $474 million deficit to a $1,565 million deficit. As a result net exports are estimated to detract around 1.0 percentage points from growth in expenditure based GDP in the December quarter.

• Exports of goods and services volumes fell by 2.2 per cent. This fall is partly due to Reserve Bank gold sales that took place in the September quarter and weaker rural and service exports.
• Imports of goods and services volumes (sa) rose 1.5 per cent. Goods debits rose 1.9 per cent and service debits fell by a marginal 0.4 per cent.
• The growth in merchandise imports reflects growth in imports of consumption goods (up 1.3 per cent), imports of capital goods (up 6.7 per cent), and imports of intermediate and other goods (up 3.9 per cent).

CANBERRA

3 March 1998