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December 1988 balance of payments

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The $599 million fall to $941 million in the current account deficit for December is welcomed by the Government.

Of special significance is the fact that around three-quarters of this improvement is due to a fall in endogenous import volumes (these are imports of a regular or ongoing nature).

At the same time the improvement was achieved despite accommodating unusually large aircraft imports - the December figure included $193 million worth of imports of civil aircraft, easily the largest figure for this item so far this financial year.

On the export side, the anticipated resurgence in rural exports is continuing, while other exports continue to hold up.

Overall, today's figures are consistent with the pattern anticipated by the Government since it become evident in the latter part of last year that a lift in imports was contributing to a temporary deterioration in Australia's trade accounts.

One of the key factors underpinning the higher import growth was a surge in business investment, with the share of investment to GDP this financial year now expected to be the highest in 35 years.

While this new capacity will help Australia's trade performance in the future, in the meantime the investment goods imports need to be carried on the current account.

The adverse effect on the trade accounts of this investment surge has been accentuated by the strong level of activity in the economy, with local demand soaking up Australian made products which might otherwise have been put to export.


A third factor that has been affecting the accounts was the run down in rural stocks, meaning less produce was available for export.

Today's figures suggest that these negative influences on the trade accounts have begun to weaken.

The figures show that imports have stabilised and begun to fall, with seasonally adjusted endogenous imports declining 3.2 per cent in December.

Export volumes have also recovered, particularly of wool and grains. Overall, rural exports rose by 40 per cent between July and December.

While a continuation of the positive developments evident in today’s statistics would see a resumption of the improving trend in our current account, the correction of Australia's external imbalance remains the foremost objective of economic policy.

Already the Australian community has contributed to a very substantial improvement in Australia's balance of payments position. .

The Government is determined that policy will continue to be directed toward building upon these gains.


PERTH/CANBERRA 18 January 1989