Today's release of the Balance of Payments confirms the dramatic impact of floods and cyclones on Australia's key commodity exports in early 2011.
Export volumes decreased 8.7 per cent in the March quarter, to be 3.4 per cent lower through the year. This represents the biggest quarterly fall in 37 years, and was driven by a 13.6 per cent decline in non-rural commodity exports.
The natural disasters caused major disruptions to Queensland's coal industry, with mining operations and infrastructure operating well below capacity during the quarter. This resulted in coal, coke and briquette exports falling by $4.6 billion or 26.8 per cent in the quarter.
Cyclones and heavy rainfall in north Western Australia in early 2011 also impacted on iron ore production, with metal ores and minerals exports down $1.3 billion or 7.7 per cent in the quarter.
Import volumes increased 1.3 per cent, to be 9.0 per cent higher through the year. The increase was driven by a 5.0 per cent rise in capital goods imports.
The negative impact on exports caused by recent flooding is expected to have a significant impact on the National Accounts numbers for March. Net exports are expected to detract around 2.4 per cent from real GDP growth in the quarter. This would be the largest quarterly detraction to GDP from net exports since the series began in the September quarter of 1959.
The terms of trade increased 5.8 per cent in the quarter, to be 22.4 per cent higher through the year. Export and import prices rose 6.5 and 0.6 per cent respectively in the quarter. The rise in export prices reflected increases across all major export categories with commodity prices in particular recording large increases. The terms of trade are now at their highest level since 1950-51.
The sharp fall in export volumes from this summer's natural disasters contributed to a widening in the current account deficit (CAD) to $10.4 billion in the March quarter (up from a revised $8.1 billion deficit in December), to be 3.0 per cent of December quarter 2010 nominal GDP. While the trade surplus declined from $6.4 billion to $3.0 billion, the net income deficit narrowed from $14.2 billion to $13.2 billion.
The level of net external liabilities rose to $780.6 billion as at the end of the March quarter. Net foreign debt rose to $677.3 billion – representing 50.4 per cent of year‑ended December quarter 2010 nominal GDP.
Despite the heavy toll on our economy in the near term from natural disasters, the fundamentals of our economy are strong and our medium-term growth prospects remain bright. We have low unemployment, strong job creation, record terms of trade and an unprecedented investment pipeline gathering steam.
31 May 2011