Australia’s current account deficit has narrowed 33 per cent to $7.2 billion in the three months to December as higher commodity prices boosted the value of exports.
The current account deficit decreased from the September quarter’s $10.78 billion, Tuesday’s seasonally adjusted figures from the Australian Bureau of Statistics showed.
In seasonally adjusted chain volume terms, the balance on goods and services was a surplus of $1.24 billion, down on the September quarter surplus of $2.02 billion.
That is expected to detract 0.2 percentage points from growth from the December quarter GDP when the data is released on Wednesday.
Economists said the net exports were slightly larger drag on the economy than expected, but a 1.6 per cent increase in government consumption had made up for it.
External debt had lifted, but debt servicing is still the best levels recorded in 36 years, said CommSec chief economist Craig James.
‘In short, Australia is paying its way in the world and external creditors would have few reasons to be concerned,’ he said.
Westpac economist Andrew Hanlan said the results showed ‘the economy lost considerable momentum over the second half of 2018, centred on housing and the consumer’.
But higher commodity prices have boosted mining profits, which has led to higher tax revenue and thus more government spending.
J.P. Morgan economist Tom Kennedy called the results a wash that didn’t change the investment bank’s prediction of fourth-quarter GDP growth of 0.4 per cent.
BIS Oxford Economics chief Australia economist Sarah Hunter said she now expects December quarter GDP growth ‘significantly below’ 0.5 per cent, pulling full-year 2018 growth below 3.0 per cent.
‘The expected drag from net exports in the December quarter adds to the disappointing preliminary construction work done data that was released two weeks ago,’ Ms Hunter said.
‘Business investment will need to pick up strongly this year and next for the RBA to hit their latest growth forecasts – the risks of a cut in the cash rate this year are likely to rise after tomorrow’s release.’
The RBA, which last month cut its 2018 economic growth forecast to 2.75 per cent from 3.5 per cent, is expected to hold the cash rate at 1.5 per cent at its March board meeting later on Tuesday.
The Australian dollar briefly lifted to 70.88 US cents from 70.83 just before the data’s release at 1130 AEDT, but gave up the gains within 18 minutes and, at 1358 AEDT, was trading at 70.76.