Australia Current-Account Gap Unexpectedly Narrows Last Quarter

Australia’s current-account deficit unexpectedly narrowed in the three months through December on increased iron ore exports.

The shortfall on goods, services and investment was A$14.68 billion ($15 billion) from a revised A$15.05 billion in the third quarter, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg News survey of 21 economists was for a A$15.3 billion gap. Net exports added 0.6 percentage point to gross domestic product growth in the fourth quarter, the bureau said today. Economists forecast a 0.5 point addition.

Reserve Bank of Australia Governor Glenn Stevens reduced the benchmark interest rate by 1.75 percentage points from November 2011 to December 2012 to stimulate industries outside of resources as commodity prices ease. A high currency has hurt earnings for manufacturers and retailers, helping create what the RBA has referred to as a multispeed economy with those industries lagging behind mining.

The net-income deficit narrowed to A$8.83 billion in the fourth quarter from the July-September period, today’s report showed. The goods and services trade balance recorded a A$5.55 billion deficit in the fourth quarter compared with a A$5.39 billion shortfall three months earlier.

The current account is the broadest measure of trade because it includes investment flows as well as goods and services shipments. A deficit represents money Australia has to borrow overseas to pay for the goods and services it imports and to finance investment not covered by local savings.

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