Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Tuesday, 28 February 2017

CAD narrows to $3.9 billion

CAD narrows remarkably

The tweets about Australia being in recession in the fourth quarter are doubtless quietly being deleted.

The current account deficit narrowed by a remarkable 62 per cent from $10.2 billion to just $3.9 billion in the fourth quarter, albeit mainly thanks to booming commodity prices rather than export volumes. 

Just a year earlier the deficit has been as wide as $23.1 billion.

The current account balance as a percentage of GDP is now in the best nick in 36 years. 

Net foreign debt has declined a little over the past 6 months, although the total outstanding remains over $1 trillion.

Recession avoided 

We'll have to wait until tomorrow for the national accounts to confirm GDP growth for the fourth quarter.

However, net exports will add a little to growth at +0.2ppts, neatly offsetting an equivalent drag from a draw on inventories. 

Meanwhile all that government debt hasn't completely gone to waste, with public demand increasing by +1.4 per cent, as such contributing +0.3ppts to growth in the quarter.

The government has been spending up on transport and other infrastructure projects.

The major banks see GDP growing by between +0.7 per cent and +1 per cent for the fourth quarter of 2016. 

In summary: no recession here. 

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