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Balance of payments: May 1994

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The preliminary balance of payments estimates for May 1994 released today by the Australian Statistician indicate a seasonally adjusted current account deficit of $1,707 million. This result is within the range of market expectations.

The May result was $53 million higher than the previous month.

The increase in the current account deficit was due to a small increase in the net income deficit and a decrease in the net unrequited transfers surplus which more than offset a slight improvement in the net services deficit.

The merchandise trade deficit was unchanged, with both exports and imports rising by 5 per cent

Rural exports were 12 per cent higher while non-rural exports rose by 3 per cent. Imports of capital goods rose by 13 per cent while imports of consumption goods increased by 8 per cent.

Comparing the eleven months to May 1994 with the same period a year earlier:

The cumulative current account deficit is $497 million (or 3 per cent) higher.

— This reflects a turnaround from surplus to deficit on the balance of trade and a lower net unrequited transfers surplus. These movements have been partly offset by a significant improvement in the net services deficit (mainly due to increased tourism exports) and a slightly lower net income deficit

Exports of goods and services have risen by 8 per cent despite subdued world economic activity.

— A strong rise in exports of higher valued goods continues to underpin this increase, with exports of machinery, transport equipment, and 'other' manufactures rising by 17 per cent -confirmation of the increasing outward orientation of the Australian manufacturing sector.

An 11 per cent increase in services exports has also made an important contribution.

Imports of goods and services have risen by 8 per cent, with capital goods (excluding civil aircraft) up 14 per cent.

— Imports of capital and intermediate goods will assist the restructuring of the Australian economy and can be expected to contribute to Australia's future export potential.

Today's figures are broadly consistent with the 1994-95 Budget forecasts of a 1993-94 current account deficit of around $16 billion. Such an outcome would be notably below the $18 billion originally projected in the 1993-94 Budget, despite much stronger growth than had been forecast in the 1993-94 Budget. The continued growth in imports of capital goods supports the Government's expectation of a strong acceleration in investment expenditure over the year ahead.

CANBERRA 30 June 1994