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  • Writer's pictureCrest Economics

Current Account Surplus- June 2020

With pandemic restrictions easing, there has been a treacherous return to normality for many Australian businesses. However, it's not all doom and gloom in the economy, as developments in Australia's external markets have issued positive signs. Troughing at USD 0.56 in the March, the lower dollar has continued to support export competitiveness, with the economy's trade surplus indicative of strong demand for commodities such as coal and iron ore in lieu of services exports. This surplus has proven significant in maintaining the historic current account surplus, the first in 40 years, with weakened imports likely to extend this position in near future ($8.4 bn, 1.7% GDP). Along with having a forseeable impact on GDP, an improved external position will provide a firm safety net for the currency. The impact of this can already be seen with the current AUD, nearing heights of USD 0.69 in the past week. This appreciation has been driven by a resurgence in investment following the release of Australia's growth statistics, which have shown relative resilience compared to other advanced economies in the world. In addition, high iron ore prices reacting to a rebound in Chinese industrial activity have further strengthened confidence among investors. The markedly optimistic turn in sentiment should help with Australia's economic recovery, while maintaining the dollar at its current level.

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