Net exports drive historic current account surplus as COVID smashes imports

Australia’s current account surplus nearly doubled in the June quarter to a history-making $17.7bn.

A historic current account surplus during the June quarter reflected imports plunging at a faster pace than exports. Picture: AAP

Australia’s current account surplus nearly doubled in the June quarter to a history-making $17.7bn amid tumbling international trade volumes as the COVID-19 pandemic closed borders and smashed demand.

In what was another day for the economic history books, seasonally adjusted figures from the Australian Bureau of Statistics showed the current account surplus lifted by $8.7bn in the quarter, pushing it to 3.8 per cent of GDP.

The result was powered by a $4.7bn lift in Australia’s trade balance to $23.9bn in the quarter as imports fell at a faster pace than exports.

“The pandemic, to date, has smashed imports harder than exports,” Westpac economist Andrew Hanlan said.

The 6.7 per cent plunge in export volumes was the largest fall in more than 32 years, ABS data revealed. That drop was hugely outweighed by a 12.9 per cent collapse in imports over the quarter — the biggest decline in 45 years.

Despite falls on both sides of the trade ledger, net exports will add one percentage point to GDP growth over the three months, the ABS said.

Citi chief economist Josh Williamson described this contribution to growth as “largely illusory, reflecting the massive demand destruction to trade wrought by the restrictions required to manage the health impacts of the COVID-19 outbreak”.

There was a 50 per cent drop in services imports, and an 18 per cent drop in services exports, highlighting the impact of border closures on overseas travel.

Tourism exports, or incoming tourism spending, dropped by $4bn, or 28 per cent to $10.3bn.