SYDNEY Dec 6 (BNA): Australia’s current account fell into deficit for the first time in three years in the latest quarter as strong domestic demand absorbed imports and miners pushed more profits abroad, although the drag on economic growth was not as great as the first. feared.
Data from the Australian Bureau of Statistics on Tuesday showed that the current account slid to a deficit of A$2.3 billion ($1.54 billion) in the July-September quarter, Reuters reported.
This was down from a surplus of A$14.7 billion in the previous quarter and far from expectations of a surplus of A$6.2 billion.
“This deficit reflects a narrow but strong trade surplus that was offset by a record high income deficit in the September quarter,” said Grace Kim, acting head of international statistics at ABS.
The income shortfall swelled to A$33.2 billion in the quarter, spurred by bumper dividend payments to foreign investors.
However, net exports still subtracted only 0.2 percentage points from growth in GDP in the third quarter, while analysts are looking for a 0.6 percentage point decline.
Separate data released on Tuesday, on the other hand, showed that government spending subtracted 0.2 percentage point from growth in the quarter.
GDP data is due on Wednesday. Before Tuesday’s stats were released, analysts had expected growth of 0.7% in the quarter, mainly driven by household consumption.
Annual growth is expected to jump to 6.3%, though mainly because of the one-off boom late last year as the economy reopened from pandemic lockdowns.
The elasticity of demand is expected to see the Reserve Bank of Australia (RBA) raise interest rates by another 25 basis points to a decade high of 3.10% on Tuesday, the eighth rise in as many months.
Markets recently lowered expected peak interest rates to between 3.35% and 3.60%, from above 4.0%, after a sudden slowdown in inflation in October.
There is even speculation that the RBA will opt to pause this week, given that the tough tightening already delivered has not fully fueled mortgage repayments.
And many borrowers who took out two- and three-year fixed-rate mortgages in 2020 and 2021 when rates were at record lows are also facing sudden and painful premium increases next year.
David Blank, head of Australian economics at ANZ, thinks the RBA will rise on Tuesday, in part because its next meeting doesn’t take place until February and because data on employment and wages remains strong.
SM