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A boost from mining exports helped Australia post its smallest current account deficit in just over 16 years during the December quarter, likely helping the nation avoid a technical recession.
The current account numbers are the final piece of the puzzle ahead of the release on Wednesday of GDP data for the December quarter. A quarter-on-quarter contraction of 0.5 per cent in the previous three month period cocked the trigger for a technical recession, defined as two consecutive quarters of economic contraction, which would have been Australia’s first in 25 years.
The current account deficit narrowed to A$3.9bn in the three months ended December 31 from a revised A$10.2bn deficit (previously $11.4bn) in the September quarter, according to the Australian Bureau of Statistics. Economists surveyed by Bloomberg expected a deficit of A$4bn. It was the smallest deficit since the September quarter of 2001.
The value of exports of goods and services rose 12 per cent to A$9.67bn, driven by gains for rural goods and hard commodities, while imports crept 2 per cent higher to A$1.46bn.
Data also showed net exports made a 0.2 percentage point contribution to GDP in the fourth quarter, as expected, but an improvement from the 0.2 percentage points they wiped off in the previous three month period when GDP contracted.
Following the data, Westpac decided to upgrade its 4Q GDP growth forecast for tomorrow to 0.9 per cent, and for the annual growth rate to rise to 2.1 per cent from 1.8 per cent at the end of September.
Yesterday, data showed company profits rose in the December quarter by the most since 2001 thanks to commodity prices, which rebounded sharply from a slump a year earlier. This also helped calm nerves Australia would fall into recession.
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