Australian Trade Deficit Grows: It’s Bad To Owe More Than You Own

Posted by Dan Denning

Leaderless, directionless, and clueless. That’s how we’d describe the state of the local and global market. The problem is the “known unknowns” (US$43 billion of them) and those pesky “unknown unknowns” (credit derivatives). More on that below.First, did you see the current account deficit widened to nearly AU$16 billion in the second quarter? The Australian Bureau of Statistics was busy yesterday. Did you wonder what, if anything, that means? Does it matter? We wondered too. What do all these numbers really mean? What we’re really after is whether Australia is getting richer or poorer during the great resource boom.

The current account has two main parts, the balance of trade and investment income. A current account surplus would indicate a growth in a country’s assets. A deficit, on the other hand, indicates a country owes more than it owns.

Australia has a trade deficit, which is a bit surprising for a country in the middle of an export boom. The country’s trade deficit (in goods and services) grew by AU$264 million in the second quarter to AU$3.7 billion. As we said, it’s a bit shocking that a country in the middle of an export boom is still importing more than it’s exporting. What is the country importing? And are people and corporations using debt to buy imports? Hold that thought.

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