Australia maintains positive growth but has a current account deficit.
2024-09-05
■ Australia's current account has been in deficit for two consecutive quarters due to a shrinking surplus in goods and services and a widening income deficit
■ The reduction of manufacturing activities in China and the decline in commodity prices such as iron ore futures are also reasons for the depreciation of the Australian dollar
On the 3rd, the Australian Bureau of Statistics (ABS) announced a current account deficit of AUD 10.725 billion for the quarter of April to June, far exceeding market expectations of a deficit of AUD 5.9 billion. Against declining commodity prices, the surplus of goods and services revenue and expenditure was AUD 11.979 billion, the lowest level since October December 2018. Meanwhile, the initial revenue deficit widened to AUD 22.457 billion due to increased overseas dividends and debt interest payments. This time, the significant current account deficit is at its highest level in six years, accounting for 1.6% of GDP, the highest since July - September 2018.
The actual GDP of Australia for the quarter of April to June, announced today, increased by 0.2% month on month, unchanged from the previous quarter's growth rate (raised from 0.1% to 0.2% in the quarter of January to March), maintaining positive growth for 11 consecutive quarters. However, household consumption, which accounts for 50% of GDP, decreased by 0.2% monthly due to reduced disposable spending caused by rising prices. Household consumption remained sluggish, reaching its lowest level after the pandemic lockdown from July to September 2021. In addition, equipment investment decreased by 1.5% month on month, marking two consecutive quarters of decline and dragging down economic growth. On the other hand, the contribution of net exports to GDP is positive, increasing by 0.2 percentage points. Still, due to the deterioration of trade conditions, the growth rate of external demand has slowed.
The Australian dollar fell to a low of $0.66 against the US dollar before the release of actual GDP. Still, the downside risk of GDP growth caused by the deterioration of the current account has been digested by the market, and the Australian dollar has now rebounded to the $0.67 range. However, since last weekend, the Australian dollar has weakened against the US dollar, manufacturing activity in China has decreased, and optimistic expectations in the country's steel market have been revised, leading to a sharp drop in iron ore futures prices and putting pressure on the Australian dollar. The July trade surplus of Australia, which is expected to be announced tomorrow, is expected to shrink. Although the Reserve Bank of Australia (RBA) maintains a tight monetary policy, the Australian dollar will likely stop falling against the US dollar at the retracement level of $0.6641, which has risen by 38.2% since August. However, there are still concerns about the outlook for the Australian economy. If it falls below this level, the next support level will be $0.6584 at the 50.0% retracement level.
■ The reduction of manufacturing activities in China and the decline in commodity prices such as iron ore futures are also reasons for the depreciation of the Australian dollar
On the 3rd, the Australian Bureau of Statistics (ABS) announced a current account deficit of AUD 10.725 billion for the quarter of April to June, far exceeding market expectations of a deficit of AUD 5.9 billion. Against declining commodity prices, the surplus of goods and services revenue and expenditure was AUD 11.979 billion, the lowest level since October December 2018. Meanwhile, the initial revenue deficit widened to AUD 22.457 billion due to increased overseas dividends and debt interest payments. This time, the significant current account deficit is at its highest level in six years, accounting for 1.6% of GDP, the highest since July - September 2018.
The actual GDP of Australia for the quarter of April to June, announced today, increased by 0.2% month on month, unchanged from the previous quarter's growth rate (raised from 0.1% to 0.2% in the quarter of January to March), maintaining positive growth for 11 consecutive quarters. However, household consumption, which accounts for 50% of GDP, decreased by 0.2% monthly due to reduced disposable spending caused by rising prices. Household consumption remained sluggish, reaching its lowest level after the pandemic lockdown from July to September 2021. In addition, equipment investment decreased by 1.5% month on month, marking two consecutive quarters of decline and dragging down economic growth. On the other hand, the contribution of net exports to GDP is positive, increasing by 0.2 percentage points. Still, due to the deterioration of trade conditions, the growth rate of external demand has slowed.
The Australian dollar fell to a low of $0.66 against the US dollar before the release of actual GDP. Still, the downside risk of GDP growth caused by the deterioration of the current account has been digested by the market, and the Australian dollar has now rebounded to the $0.67 range. However, since last weekend, the Australian dollar has weakened against the US dollar, manufacturing activity in China has decreased, and optimistic expectations in the country's steel market have been revised, leading to a sharp drop in iron ore futures prices and putting pressure on the Australian dollar. The July trade surplus of Australia, which is expected to be announced tomorrow, is expected to shrink. Although the Reserve Bank of Australia (RBA) maintains a tight monetary policy, the Australian dollar will likely stop falling against the US dollar at the retracement level of $0.6641, which has risen by 38.2% since August. However, there are still concerns about the outlook for the Australian economy. If it falls below this level, the next support level will be $0.6584 at the 50.0% retracement level.