RTTNews - The Australian Bureau of Statistics announced Tuesday that Australia's current account deficit showed a sequential increase in the second quarter. The widening of the current account deficit was attributed to the good and services balance, which swung to a deficit in the second quarter from a surplus in the last quarter.

The current account deficit widened by a little over A$7 billion in the second quarter to a seasonally adjusted A$13.35 billion at current prices compared to the revised A$6.35 billion deficit in the first quarter. Economists had expected a deficit of A$10.7 billion.

The goods and services balance returned a deficit of A$1.67 billion in the second quarter compared to the A$4.27 billion surplus reported in the first quarter. The widening of the goods and services deficit was due to a faster rate of decline in exports than that of the imports. Exports fell 19% compared to a 9% drop in imports.

Of the A$11.16 billion decline in exports, exports of non-rural goods were down A$8.06 billion, while other goods dropped A$2.39 billion and rural good exports decreased A$706 million.

On the other hand, imports were down A$4.87 billion in the second quarter. Of this, imports of other goods decreased A$2.08 billion, while capital goods slipped A$1.95 billion and intermediate & other merchandise good imports were down A$1.3 billion.

The fall in the goods and services balance was slightly offset by the surplus on services of A$219 million compared to the A$132 million deficit in the first quarter.

In volume terms, the increase of A$683 million in the deficit on goods and services was expected to detract 0.2 percentage points to growth in the second quarter gross domestic product or GDP.

The net income account was at a deficit of A$11.49 billion in the second quarter compared to the A$10.42 billion deficit in the previous quarter.

At the same time, the current transfers balance was at a deficit of A$192 million compared to the A$188 million deficit in the previous quarter.

The bureau also reported that Australia's net international investment position as on June 30 dropped by A$7.5 billion to a net liability position of A$725.9 billion. The decrease was mainly due to adverse price changes in the second quarter.

During the second quarter, the net foreign equity liability increased 6% to A$92.7 billion, while the net foreign debt liability decreased 6% to A$633.2 billion.

Later in the day, the Reserve Bank of Australia's board that met to decide on the monetary policy announced no change in the interest rate for the fifth straight month. The cash rate was left unchanged at 3.0%, which is the lowest in 49 years.

RBA governor, Glenn Stevens noted that economic conditions in Australia was stronger than expected with resilience in consumer spending, exports and business investment, and that confidence had also recovered.

Stevens predicted that economic growth was likely to be firm going into 2010.

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