Australia’s current account deficit likely widened in Q4 2015, but exports likely grew nevertheless

Australia's trade deficit is expected to have widened to AUD9.5bn in Q4 from AUD7.5bn in Q3, little smaller than deficit of Q2. The current account deficit is also expected to widen from 18.1bn in Q3 to 19.5bn. This is expected to leave the 2015 deficit at 71.5bn, the biggest since 2007. As a percent of GDP, it is expected to come to 4.4%, much smaller than the 6.7% in 2007. Still, on this basis, it will be the biggest deficit since 2009, and represent a subtraction of 1.4 percentage point of GDP from 2014.

However, net exports are likely to have increased again, in spite of the wider deficit, and are expected to have positively contributed to the GDP growth.  Nominal exports in Q4 fell 3.2% q/q, more than the 0.7% q/q fall in imports. Nevertheless, after applying the official export and import price indices of -5.4% and -0.3%, respectively, it shows a growth in real exports of 2.2% and a drop in imports of 0.4%. This indicates a net contribution to GDP growth of Q4 of about 0.5pp, a considerable decrease from the 1.5pp contribution to Q3 GDP growth.