Australian Current Account Gap Widens in the First Quarter

Australia's current account deficit widened in the first quarter, albeit less so than expected. Economists looking for the gap to widen to -20500M saw the figure slightly outperform to print at -19492M. The continued deterioration owes to the drop in exports all the while imports rise. Record high interest rates at 7.25% have attracted buyers to the Aussie dollar, driving the currency higher and making Australian exports relatively more expensive to foreign buyers. Meanwhile, mining firms have strained shipping infrastructure as they compete to quench China's seemingly insatiable demand for their products. This has slowed delivery, dampening overall export levels further. The transport has been made worse by weather as heavy rainfall brought floods and disrupted export routes. The other side of the mining sector's buoyancy had been a boost to employment. This expanded disposable incomes and saw Australians shell out more for imported products. On balance, today's release is backward-looking. While imports can be expected to have remained strong through March, they have likely given back a lot of grown in the second quarter. Yesterday's April Retail Sales posted a decline of -0.2% as consumers cringed under record high borrowing costs. As the economy continues to slow, we are likely to see the deficit improve in the coming months.

DailyFX

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