Australia surplus boosted by gold demand

SYDNEY–Australia’s current account was in surplus for a second consecutive quarter, supported by strong gold prices, expanding exports and a fall in the Australian dollar to its lowest levels in a decade.

The current account surplus was 7.86 billion Australian dollars (US$5.36 billion) for the third quarter, the statistics bureau said Tuesday, wider than the A$6.1 billion surplus expected by economists.

It was the only the second time in 46 years that the current account has been in surplus for two straight quarters.

Net exports are expected to add 0.2 percentage point to third-quarter GDP growth, helping to put some pep in what is expected to be a sleepy period for economic activity.

The surplus was helped by a strong iron ore price and increasing gas exports. Over the last decade, Australia has brought online vast amounts of new gas production that has moved into the export phase.

Heightened geopolitical risk drove up demand for gold exports, the Australian Bureau of Statistics said.

“Strong export volumes for non-monetary gold reflected global geopolitical developments, whereas iron ore and liquefied natural gas have shown sustained high export levels,” said Bruce Hockman, chief economist at the ABS.

The Australian dollar has weakened as the Reserve Bank of Australia has moved to cut official interest rates sharply this year. In September, the currency dipped to its lowest levels since March 2009.

Weak wages growth and sluggish consumer demand have slowed the economy, prompting the RBA to cut interest rates in June, July and August.

The RBA is expected to keep its official cash rate on hold at a record low 0.75% at a policy announcement at 0330 GMT, but keep the door open to cutting further in 2020.

A report card on the economy will be published Wednesday, with GDP growth of around 0.5% expected for the quarter and 1.6% year-on-year, a pace considered too weak to lower unemployment over the medium term.

Courtesy: Marketwatch