Australia has posted its first current account surplus in 44 years with a $5.9 billion surplus for the June quarter.
But the good economic news – based on booming export volumes of liquid natural gas, coal and iron ore – comes on the eve of the release of quarterly figures that are expected to show the weakest national economic growth in nearly 20 years.
The June current account figures beat predictions from economists, who had expected a surplus of about $1.5 billion. It follows a $2.9 billion deficit in the March quarter.
The Australian Bureau of Statistics said on Tuesday a sharp rise in iron ore prices amid heightened US-China trade tensions had helped push up the value of exports by 4.8 per cent, while continued weakness in household spending meant the value of imports fell 0.6 per cent.
The rising exports and falling imports will contribute an estimated 0.6 per cent to GDP growth when the June quarter national accounts are released on Wednesday.
Economists’ expectations for that data are gloomy, ranging from the slowest economic growth since the 2008-2009 global financial crisis to the weakest pace since the introduction of the GST in 2000.
This would be in sharp contrast to the upbeat appraisal of the economy in the April 2 budget.
Prime Minister Scott Morrison said he expected the figures to be “soft” but the right economic settings were in place.
“All of this was part of this year’s budget in the full knowledge that we would be facing a very difficult quarter,” Mr Morrison said.
Economists’ forecasts for the June quarter centre on a 0.5 per cent rise in gross domestic product, which would drag the annual rate down to just 1.4 per cent from 1.8 per cent in the year ended March.
That would be about half of what is considered as Australia’s long-term trend rate at 2.75 per cent.
Retail spending data released at the same time on Tuesday as the balance of payments numbers showed an unexpected 0.1 per cent fall in consumer spending in July, suggesting stimulus from tax cuts and the June and July rates cuts had yet to flow through.
On Wednesday, BIS Oxford Economics chief economist Sarah Hunter said improvements in the Sydney and Melbourne housing markets – as well as cuts to interest rates and income taxes – should provide a boost over the next 12 months.
“But a broad-based pick-up won’t materialise until growth in household income accelerates,” she said.
“Given the construction sector downturn – which will weigh on employment – and the weakness in wages growth, we do not expect to see this in the near term.”
The RBA left interest rates unchanged at a record low of 1.0 percent at its monthly board meeting on Tuesday. But expectations of an October cut continue to grow – and the bank flagged further cuts “if needed to support sustainable growth”.
The outlook for the global economy remained “reasonable”, the RBA said, although the risks were tilted to the downside.
“A further gradual lift in wages growth would be a welcome development,” RBA Governor Philip Lowe said.
ABS chief economist Bruce Hockman said six consecutive quarters of broadly commodity driven goods and services surpluses had laid the foundation for Australia’s first surplus since June 1975.
He said both prices and volume had contributed.
“Similar to the March quarter 2019, continued global supply interruptions have maintained high iron ore prices into the June quarter, boosting our export receipts to record levels,” Mr Hockman said.
“Export volumes for the key bulk commodities of liquid natural gas, coal and iron ore were up.”
The Australian dollar resumed its decline against the US dollar following the ABS’s dual data drop, falling as low as 66.96 US cents.
That’s close to the more than 10-year low 66.77 cents it touched last month.