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Australia boasts record current account surplus in Q3

Published 03/12/2019, 12:42 pm
Updated 03/12/2019, 12:49 pm
© Reuters.  Australia boasts record current account surplus in Q3
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* Current account surplus A$7.9 bln vs A$6.3 bln forecast

* Net exports add 0.2 ppt to Q3 GDP growth

* Government spending adds another 0.3 ppt to GDP

* RBA to stand pat on rates as past cuts work through

By Wayne Cole

SYDNEY, Dec 3 (Reuters) - Australia racked up its largest current account surplus on record last quarter as resource exports to Asia defied global trade tensions, producing an influx of cash that fattens company profits and boosts the government's tax take.

Data out Tuesday showed the country's current account surplus swelled to A$7.9 billion ($5.36 billion) in the September quarter, handily topping forecasts of A$6.3 billion and only the second surplus since 1975.

Yet this river of gold is not making its way to consumers struggling with stagnant wage growth and sky-high debt, a major reason the broader economy keeps disappointing.

The Reserve Bank of Australia (RBA) has tried to juice things up by cutting interest rates three times since June to an historic low of 0.75%, with only limited success.

The bank holds its December policy meeting later on Tuesday and is expected to leave the door open to further easing, as it gauges the impact of the stimulus already delivered.

Markets are almost priced for a move to 0.25% by April, with a real chance of reaching 0.25% by year end or even a drastic shift to quantitative easing by buying government bonds.

Data due out on Wednesday is expected to show the economy expanded by 0.5% in the September quarter, the third straight quarter of middling outcomes.

Annual growth is forecast to pick up to 1.7% from a decade low of 1.4%, which, while pedestrian by past performances, would still support the RBA's hopes for a gradual turnaround.

Australia's exporters at least seem to be going gangbusters.

Exports hit a record A$127 billion in the third quarter, up 14% on a year earlier thanks in large part to higher prices for iron ore and gold and a jump in liquefied natural gas output.

However, as the major resource companies doing all this shipping are majority owned by foreigners, much of the profit they earn flows offshore.

Neither are miners splashing out on their staff, with annual wage growth in the sector stuck at a miserly 2%.

Much of the boom in exports also comes from higher prices, rather than volumes, so the money earned is stripped out of the headline estimates of real gross domestic product (GDP).

Thus while the surplus on goods and services in current dollars climbed to A$21 billion, the "real" equivalent for GDP was only A$9.3 billion.

As a result, net exports added a modest 0.2 percentage points to overall economic growth in the quarter.

Other data out on Tuesday, showed government spending also added around 0.3 percentage points to growth, which should help offset some of the weakness in private consumption.

The conservative government of Prime Minister Scott Morrison has so far rebuffed calls for a major injection of fiscal stimulus, choosing instead to stay wedded to a political pledge to return the budget to surplus.

($1 = 1.4736 Australian dollars)

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