Deficit widens to $10.7bn for March quarter

Economic growth figures tomorrow are set to be stronger than first thought, thanks to a boost from higher export volumes.

Economic growth figures due out tomorrow are expected to be stronger than first thought, thanks to a boost from higher export volumes.

Balance of payment figures showed that surplus on goods and services rose $1.8 billion in real terms in the first three months of the year, and will make a contribution of 0.5 percentage points to March quarter gross domestic product (GDP), the Australian Bureau of Statistics said.

That is much stronger than the zero contribution the market was expecting.

ANZ co-head of Australian economics Felicity Emmett said her bank has upgraded its March quarter GDP forecast to 0.9 per cent, from the 0.6 per cent prediction made last week.

Quarterly growth of 0.9 per cent would be the strongest since the 1.1 per cent recorded in the first three months of 2014.

“Strength in the economy continues to be concentrated in exports, particularly resources exports, and housing,” Ms Emmett said.

“The rest of the economy remains soft, with falling business investment driven by the wind back in mining investment, and only moderate growth in consumer spending.”

JP Morgan has also upgraded its forecast because of the trade data, to 0.8 per cent from 0.5 per cent made last week.

JP Morgan economist Tom Kennedy said large falls in commodity prices are being offset by very strong rises in export volumes and will make a much larger contribution to growth.

“While the nominal trade balance contained few surprises, the price/volumes split in today’s report was materially different from the preliminary estimates,” he said.

“Indeed, net exports were significantly stronger in real terms than we had expected.”

Australia’s terms of trade on goods and services fell 2.9 per cent in the March quarter, seasonally adjusted.

The terms of trade are the price of exports relative to the price of imports.

The current account deficit was $10.7 billion in the March quarter, seasonally adjusted, from $10.2 billion in the previous quarter.

Economists had expected a deficit of $10.9 billion in the first quarter. The fourth-quarter deficit was revised upwards to $10.2 billion from the $9.6 billion figure initially reported.

Australia’s net foreign debt rose by 3 per cent in the first quarter from the fourth to $954.7 billion, the Australian Bureau of Statistics said.

AAP