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Current acct deficit at $15.5b in June qtr

AAP logoAAP 6/09/2016

Australia's current account deficit hit an unexpectedly low $15.5 billion in the June quarter, after official figures for the previous quarter were revised.

The market had forecast the deficit on the current account, which measures the flow of income and foreign trade trade payments between Australia and the rest of the world, to shrink to $20 billion.

It had been recorded at $20.8 billion in the March quarter.

But after major revisions to reinvested earnings by companies, the March quarter current account deficit was revised down to $14.8 billion by the Australian Bureau of Statistics.

As a result, although the deficit actually widened from the previous quarter, it still came in well below expectations.

Commonwealth Bank economist John Peters said the data also suggested the huge falls in commodity prices since the end of the resources boom could be over, with bulk commodity prices set to pick up.

"The large falls in bulk (iron and coal) export prices in recent years have driven the terms of trade ever lower, which has in turn retarded national income and nominal GDP growth," Mr Peters said in a note.

"There now could be some light at the end of the tunnel and the long national income drought may be in the early stages of passing."

The terms of trade, the ratio of export prices to import prices, rose by 2.3 per cent.

After allowing for price changes, the surplus on goods and services contracted, which will snip 0.2 percentage points from the June quarter measure of gross domestic product, the ABS said.

As well as the trade figures, the ABS released estimates of government spending, which Westpac economist Andrew Hanlon said showed a solid rebound in public investment in the three months to June.

"Public demand surged, up 2.7 per cent. We were looking for an improvement, but this far exceeds our expectation for a one per cent increase," he said a in a note.

"Public investment did rebound, consistent with an emerging upswing, as state governments commit to new projects."

After the foreign trade and government spending figures on Tuesday, a number of economists raised their June quarter GDP forecasts, bringing the median up from 0.3 per cent to 0.4 per cent growth, for an annual rate of 3.2 per cent.

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