Q1 Net Exports Less Negative, Upside Risk To GDP

The current account surplus widened to $12.3bn in Q1 from the downwardly-revised $11.7bn in Q4 driven by a $2bn increase in the trade surplus to $41.05bn. Exports of goods & services rose 0.4% q/q while imports fell 0.9%. Net exports detracted 0.2pp from Q1 GDP (consensus -0.5pp), which was less than expected and thus there’s an upside risk to Wednesday’s GDP growth which consensus is currently forecasting to rise 0.3% q/q.

• The net primary income deficit widened $1.6bn to $28.5bn, the second highest on record.
• The ABS notes that the trade surplus was also the second highest, which was supported by a 2.8% q/q increase in the terms of trade as export prices (-1.3% q/q) fell less than import prices (-4% q/q – the largest decline since Q4 2010). The decline in imported inflation was driven by fuel & lubricants as global prices fell and helped by the stronger AUD.
• The rise in exports was driven by travel services, especially arrival of overseas students, and strong iron ore and lithium shipments. Overseas students are now at 94% of pre-pandemic levels, so most of the recovery has taken place. The tourism recovery also boosted exports.
• Chain volume exports rose 1.8% q/q in Q1 after 1.4% in Q4 while imports rose 3.2% q/q after falling 4%. This resulted in the real trade surplus narrowing $1.2bn after widening $6.2bn in Q4 and so a net export detraction of 0.2pp is estimated by the ABS.

Source: MNI - Market News/ABS

Australia terms of trade

Source: MNI - Market News/ABS