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A narrowing of Australia's current account deficit is unlikely to last because the trade deficit is widening, economists say. But Australia's economic growth prospects will not be dented because imports grew at the same rate as exports.
The current account deficit narrowed a little to a seasonally adjusted A$15.59 billion ($17.9 billion) in the September quarter, from a downwardly revised A$15.62 billion in the June quarter, the Australian Bureau of Statistics (ABS) reported yesterday.
The result was narrower than the median market forecast for a deficit of A$16.4 billion. An increase of A$184 million in the deficit on goods and services, in volume terms, would add zero percentage points to September quarter gross domestic product (GDP), the ABS added.
HSBC chief economist John Edwards said that while Australia's current account deficit - which includes the trade deficit and income transfers - had narrowed in the third quarter, the improvement would be temporary.
"The trade deficit component actually widened 14 per cent to A$4.4 billion for the quarter," he said.
"The whole improvement in the current account was due to a fall in the net income deficit, in turn caused by lower profit transfers to foreign owners of Australian business assets.
"We expect to see the net income deficit bounce back in the current quarter."
Both the import and export components of the trade deficit grew by 2.3 per cent in the three months to September. But goods and services imports stood at A$60.88 billion in the September quarter, compared with A$52.67 billion for equivalent exports, which meant the trade deficit continued to widen.
The ABS also revealed that the net income deficit shrank to A$11.15 billion in the September quarter from A$11.62 billion in the three months to June.
JP Morgan economist Helen Kevans said renewed financial market volatility would narrow the net income deficit further in coming quarters as corporations became less inclined to raise debt offshore.
Still, Commonwealth Bank of Australia economist Joseph Capurso said the smaller net income deficit was offset by an expansion in the trade deficit.
- AAP
