Australia's Current Account Balance Falls To AU$10.7B Deficit In June Quarter, Biggest Drop In 5 Years

The Australian Bureau of Statistics (ABS) reported a significant drop of AU$4.4 billion in the country's current accounts balance, which plunged to a AU$10.7 billion deficit for the June quarter.

This marks the largest account deficit since 2018 despite a surge in consumer demand. In addition, the goods and services balance decreased by AU$3.9 billion, sharply diving to AU$12 billion, reported News.com.au.

"This quarter's current account deficit was the largest since June quarter 2018, reflecting continued falls in bulk commodity prices and higher income paid to non-residents," the ABS' head of International Statistics Tom Lay said, according to Sky News.

"Iron ore and coal prices saw a second quarterly fall, which is reflected in goods export prices 5.4% lower compared to this time last year," Lay said.

Following public demand, two leading banks have updated their GDP forecasts, as the economy reportedly faced limited growth prospects.

Commonwealth Bank and NAB have revised their expectations, with the former's senior economist Belinda Allen saying, "Public demand's 0.4 percentage point contribution to growth is double what we had pencilled in. Consequently, we now revise up our forecast for GDP growth to 0.4% over the quarter, up from the previous 0.2% figure. That should keep the annual rate unchanged at 1.1%."

Meanwhile, NAB also revised its forecast to 0.3% quarter-on-quarter, which was initially 0.1%.

NAB senior economists Taylor Nugent and Brody Viney said, "The upward revision to our forecast is due to surprising strength in public demand, set to add 0.4 percentage points to growth."

Economists had predicted a mere 0.2% gain in the June quarter GDP results and a moderate 0.9% rise for the year, according to the release of key data on Tuesday.

The nation may experience its slowest economic growth since the 1990s, with forecasts predicting a decline in economic growth from 1.1% to 0.9% for the 2024 financial year.

It was also anticipated that GDP per capita will fall for the sixth consecutive quarter, deepening the recession.

Following the release of the figures, Treasurer Jim Chalmers attacked the Reserve Bank of Australia (RBA) in an attempt to deflect blame from the government for the nation's economic woes, Sky News reported.

"With all this global uncertainty on top of the impact of rate rises, which are smashing the economy, it would be no surprise at all if the national accounts on Wednesday show growth is soft and subdued," he said. "We anticipated a soft economy at budget time and that's what most economists now expect to see in these new numbers for the June quarter."

Chalmers' comments were countered by Liberal leader Peter Dutton and shadow finance minister Jane Hume.

"There are a lot of Australians who are really hurting at the moment, which is why it's quite amazing to see Jim Chalmers out there at war with the Reserve Bank Governor," Dutton said in a doorstop interview on Tuesday. "Jim Chalmers has saved all of his anger for the Reserve Bank Governor, and frankly, he's got nothing left in the tank to fight inflation."

Chalmers dismissed the allegations of blame-shifting, stating that the government worked "well and closely" with RBA Governor Michelle Bullock in the fight against inflation.

"We've got different responsibilities, but we've got the same objective and our objective is to get on top of this inflation challenge without smashing an economy which is already weak," Chalmers said. "We will get those new numbers tomorrow. We'll wait and see what they say, but most economists expect that growth in our economy is really soft and subdued right now."

"Interest rates are part of the story there, so is global economic uncertainty, and so are all these price pressures in the economy."