Australia recorded its first current-account surplus since 1975 in the three months through June, underpinned by a surge in iron ore prices that have since retraced much of their gain.
The windfall was A$5.9 billion ($4 billion) in the second quarter, compared with a revised A$1.1 billion shortfall three months earlier, the statistics bureau said in Sydney Tuesday. Economists had forecast a A$1.5 billion surplus.
The result is mainly a function of the extraordinary and unexpected spike in iron-ore prices, fueled by huge supply disruptions and record Chinese steel production. Though both of these have since unwound, with iron ore falling the most on record in August, suggesting the surplus may be short-lived.
Reserve Bank Deputy Governor Guy Debelle last week noted the “significant transformation” from 33 years ago when then-Treasurer Paul Keating warned that Australia’s record current account deficit — at almost 6% of GDP — risked seeing the nation becoming a “banana republic.”
Yet for the RBA, which kept its cash rate unchanged at a record-low 1% Tuesday, and is forecast to reduce it to 0.5% next year, a current-account surplus may not be what it needs. A surplus suggests the currency might be a bit stronger than it otherwise would be and investment somewhat softer.