Australia’s [B]Current Account Balance[/B] deficit widened more than economists expected in the second quarter, revealing a shortfall of –A$13.4 billion, shaving 0.2% off GDP in the three months to June. Preliminary forecasts had called for a –A$10.7 billion result. Exports dropped by a whopping 14.9%, more than doubling the -7.16% contraction in imports, with overseas shipments of gold (-40.1%), transport equipment (-35.9%), coal (-25.5%) and metal ores (-20.5%) leading the decline. The release offers a counter-balance to the encouraging manufacturing PMI release that crossed the wires earlier in the session, bolstering the argument that firms will be faced with sharp declines in sales as absent private demand is unable to replace the stimulative effects of the government’s fiscal measures.
The result may take on additional significance later in the session as the Reserve Bank of Australia announces interest rates, considering bank governor Glenn Stevens has justified a comparatively hawkish bias with the claim that exports have been “notable for their resilience”, conspicuously removing language that left the door open for further easing. While trading in overnight index swaps suggests the market is pricing in virtually no chance of an actual rate increase, the RBA chief’s aggressive rhetoric will have traders looking for clues on when tightening may indeed transpire.