SCOREBOARD: Accounts action

Concerns that fourth-quarter GDP may print weak don't seem to be justified by the current accounts and trade data.

The data

- Australia’s current account came in broadly as expected at a deficit of $8.4 billion in the fourth quarter compared to a deficit of $5.6 billion in the third quarter. This was the result of a trade surplus of $3.6 billion and a net income deficit of $11.9 billion.

- The ABS advises that net exports will add about 0.3 percentage points to the fourth-quarter GDP result. Exports (by volume) rose 2.2 per cent in the quarter after a 2.2 per cent increase in the third quarter, while imports (by volume) were up 0.7 per cent after a 4.8 per cent lift last quarter.

- The rise in exports was driven by a 21 per cent gain in cereals, a 6.1 per cent lift in metal ores and a 5.3 per cent rise in coal.

- Imports were driven by food, aircraft and gold and excluding those items imports were off 0.4 per cent. Consumer goods imports fell 0.4 per cent after a 6.3 per cent surge in the third quarter.

- The public accounts show government consumption rose by 1.0 per cent in the fourth quarter, while public investment rose 0.6 per cent.

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What it means

Well my concern that fourth-quarter GDP tomorrow may print weak doesn’t seem to be justified by the latest dataflow. Investment is looking weak, sure, but the net effect of export and import volumes is such that net exports will add about 0.3 percentage points to growth and public spending will top that up as well. Throw in a strong contribution from the consumer and inventories and it now looks like GDP will be in the vicinity of 1 per cent. All good.

Other than that, broader trends don’t really seem to have changed in this data – imports and export are showing healthy growth. Imports (by volume) have been very volatile of late and so the fact that imports excluding gold and aircraft were negative is meaningless. Some may argue that this shows demand is weakening, but this isn’t really what the data is saying for mine. Consumer goods imports surged last quarter, they came off a bit this quarter. Similarly, capital goods showed strong growth in telecommunications and aircraft, while the components that did fall, fell after very strong growth the previous quarter. As for in intermediate goods imports, they fell 1.1 per cent after a 9 per cent gain over the last few quarters.

Finally on the export volumes front, well the drivers change from quarter to quarter but so far, exports have increased by an average 2.5 per cent quarter-on-quarter over the last few quarters. No real issues here. And that growth doesn’t look set to change anytime soon.

Adam Carr is senior economist at ICAP Australia. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

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