Economic growth estimates for the September quarter are likely to be trimmed, after the release of data showing strong import growth and a cutback in government spending.
A seasonally adjusted current account deficit of $5.637 billion was reported for the September quarter, narrowing from a $6.660 billion deficit in the June quarter, the Australian Bureau of Statistics (ABS) said on Tuesday.
The narrower deficit, the result of continuing high export prices, was in line with markets expectations for a $5.6 billion deficit.
After adjusting for price changes, however, the data showed export growth being outpaced by growth in imports.
JP Morgan economist Ben Jarman said the trade suggested figures due on Wednesday were likely to show gross domestic product (GDP) grew at around its previous trend.
“It looks like you’re going to be constrained to trend-like growth in the third quarter, something around about 0.6 per cent,” he said.
“That’s despite all the strength that is happening capital expenditure in mining.
“Certainly there’s a lot of investment activity going on but a lot of that requires imports of capital goods and that’s dragging on the strength of the GDP.”
Mr Jarman said the narrower current account deficit was due mainly to rising commodity prices.
“The current account came in as expected as export prices in particular were pretty strong,” he said.
The ABS also published September quarter government spending figures on Tuesday.
Total government spending was down by 2.5 per cent in seasonally adjusted and inflation-adjusted terms in the quarter.
Economists estimate the fall in government spending will cut about a 0.6 percentage points from GDP growth in the quarter.
Mr Jarman said the falling government expenditure figures were expected.
Nomura chief economist Stephen Roberts said the September quarter trade figures revealed a current account deficit at near historic lows.
“The current account deficit is roughly about 1.6 per cent of GDP,” he said.
“That is probably the lowest current account deficit as a percentage of GDP that Australia has run in a very long time.”
Mr Roberts said the figures meant forecasts of a rise in GDP for the September quarter of 1 per cent or greater were probably correct.
He said the 2.5 per cent decline in total government spending would be offset by other factors including strong growth in capital expenditure.
“It looks as if we’ll still have a pretty good GDP reading out tomorrow,” he said.
CMC Markets chief market strategist Michael McCarthy said the balance of payments data revealed little dramatic change in the economic environment.
“The figure of $5.637 billion (in deficit) is very much in line with market forecasts,” he said.
“Net exports as percentage of GDP (gross domestic product) is also in line, pointing to that ongoing current account balance, so it’s steady as she goes.”
The figures would be a boon for Australian bank in terms of their funding in overseas markets, Mr McCarthy said.
