Australia posts record current account deficit

Australia posts record current account deficit

The Australian Bureau of Statistics disclosed that the country's current account deficit increased from A$15.4 billion in the fourth quarter of 2004 to nearly A$15.7 billion ($11.8 billion) in the first quarter of 2005, a new record. A rise in foreign investors' earnings compounded the negative effect of the increase in consumer goods imports and decline in farm exports. The drought in the Australia's farmland cut down the rural goods exports while increased shipments of home appliances and clothing have boosted imports. Slow export growth coupled with soaring import growth continues to hurt the country's bottom line. The current account deficit is the broadest measure of international trade because it incorporates financial transactions. The rising deficit indicates that Australia has to attract more funds from overseas to finance investment. Another contributing factor to the current account deficit is the net income shortfall, which rose from A$8.22 billion to A$8.44 billion. The income deficit widened in the first quarter as foreign investors in Australia earned more from their holdings of stocks and bonds.