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The current account deteriorates further

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The 13 per cent deterioration in the current account deficit in July represents a serious body blow to the Keating government's budget strategy.

It is not just that the current account deteriorated by another $159 million in July (seasonally adjusted), but the trend is going in the wrong direction.

The rise in the current account deficit in July was the fifth successive monthly deterioration in trend terms.

This trend must be of serious concern to the Keating government, and reinforces concern over the budget forecast of a $15 billion deficit in 1992-93 handed down only two weeks ago.

The figures raise the possibility that a rise in interest rates could be just around the corner.

The data out of the Bureau of Statistics holds particular embarrassment for Prime Minister Keating.

It should not be forgotten that Mr Keating gave Australia th e recession we had to have" essentially as a mechanism to address Australia's chronic current account problems.

But after years of pain, the current account remains a problem.

Mr Keating's recession has not solved anything.

The July balance of payments figures contain a series of body blows for the government:

* the $1.4 billion deficit for July was worse than market expectations

* the $159 million deterioration in the deficit represents the fifth successive deterioration in the current account

* seasonally adjusted imports rose by 6.0 per cent, outstripping a 1.0 per cent rise in exports

* and, most significantly, merchandise trade recorded a deficit.

There is no evidence in these numbers of a sustainable recovery.

31 August 1992 Cairns

Contact: David Turnbull (06) 2774277 D137/92