Australia current account deficit shrinks to smallest in 15 years

Australia boasted the smallest current account deficit in 15 years last quarter as booming resource exports delivered a whopping turnaround of A$8 billion to the nation's finances, boosting company profits and economic growth. The improvement should also lessen the risk of the country losing its triple A credit rating given ratings agency Standard & Poor's cited a reliance on foreign funding as one reason it might downgrade.
Tuesday's data from the Australian Bureau of Statistics showed the current account deficit shrank by two-thirds to A$3.9 billion ($2.99 billion) in the fourth quarter of last year. The swing was driven mostly by rising prices for Australia's major resource exports including iron ore and coal which delivered a goods and services surplus of A$4.7 billion.
Scott Haslem, an economist at UBS reckons that, with prices for iron ore holding strong, Australia could actually record its first current account surplus since 1975 this quarter. "The extent and duration of the spike of commodity prices, and subsequent material improvement of Australia's trade and external position, was largely unexpected," said Haslem.
A separate release on Tuesday showed government spending likely added 0.2 to 0.3 percentage points to growth, after being a drag the previous quarter. As a result figures on gross domestic product (GDP) due on Wednesday are expected to show growth of 0.7 percent, bouncing from a shock 0.5 percent contraction in the third quarter. Annual growth would still only be a tepid 1.9 percent, with the economy barely expanding over the second half of the year, but the bonanza from exports will be a big boost to measures of national income and nominal growth.