Australia's current account deficit narrowed to its smallest in more than 15 years last quarter courtesy of surging prices for its major resource exports, providing a bulwark for the country's endangered triple-A credit rating.Yet the shortfall of A$3.1 billion ($2.31 billion) still disappointed investors who had hoped for a surplus and knocked the Australian dollar down a quarter US cent to $0.7463.
The main miss came from investment income with Australians earning less from their assets abroad. The volume of exports shipped also slipped, partly due to bad weather, and shaved a larger-than-forecast 0.7 percentage points from real gross domestic product (GDP). Other data out on Tuesday showed government spending added only marginally to growth in the first quarter.
All combined, that left analysts forecasting the economy expanded a meagre 0.2 percent in the quarter, a step back from the previous quarter's brisk 1.1 percent. Growth for the year is seen slowing to around 1.6 percent, from 2.4 percent, when the report is released on Wednesday. A big unknown is household consumption which surprised with its strength late in 2016, but is being burdened by record-low wage growth and high levels of mortgage debt.
The Reserve Bank of Australia (RBA) remains confident economic activity will pick up again to reach around 3 percent, a major reason it is thought certain to keep interest rates steady at its June policy meeting on Tuesday. Rates have been at an all-time low of 1.5 percent since August last year and look like staying there for some time yet. Most analysts polled by Reuters expect no change until late 2018 while markets imply only an 18 percent chance of a cut by the end of this year. Tuesday's figures from the Australian Bureau of Statistics did show a barnstorming performance by commodity exports which boosted the surplus on goods and services to A$9.0 billion.
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