Current Account Balance United States
Describes the flow of all goods and services, income, and transfer payments to and from Australia. This figure acts as a gauge of how Australia â€˜s economy interacts with the rest of the world. Whereas the other side of the Balance of Payments, the Capital and Financial Accounts, deals mainly with financial assets and investments, the Current Account gives a detailed breakdown of how the country intermingles with rest of the global economy on a practical, non-investment basis.
The Current Account is comprised of the value of the trade balance (exports and imports for goods and services), income payments (such as interest, dividends and salaries) and unilateral transfers (aid, taxes, and one-way gifts). A positive value (current account surplus) indicates that the flow of capital from these components into Australia exceeds the capital leaving Australia. A negative value (current account deficit) means that there is a net capital outflow from these sources. Persistent Current Account deficits may lead to a natural depreciation of a currency, as trade, income and transfer payments usually reflect Australian dollars leaving the country to make payments in a foreign currency (just as underlying surpluses act as an appreciating weight).
There are a number of factors that often work to diminish the impact of the Current Account release on the market. The report is not very timely, released every quarter. In addition, many of the components that lead to the final Current Account production and trade figures are known well in advance. Lastly, since the report reflect data for a specific reporting month, any significant developments in the Current Account should plausibly have been felt during that quarter and not during the release of data.
But just like GDP and Trade Balance, Current Account is central to forecasting long term developments in foreign exchange rates. It gives a detailed picture of how the Australian economy interacts internationally, breaking down these interactions into separate components that can be tracked and often anticipated. Thus the weight of the Current Account has led it to historically be one of the more important reports out of Australia.
The figure appears in headlines as the Current Account balance in billions of Aussie Dollars.
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