SYDNEY: Australia's current account deficit widened to the largest in six years in the June quarter as commodity prices slipped and more money flowed abroad in debt and dividend payments, while net exports added less to economic growth than hoped.
Data from the Australian Bureau of Statistics on Tuesday showed the current account ran a deficit of A$10.7 billion ($7.26 billion) in the June quarter, well above forecasts of a A$5.9 billion shortfall.
Trade only added 0.2 percentage points to gross domestic product (GDP), well short of the 0.6 percentage points forecast by analysts and raising the risk of a contraction that could lead to a technical recession.
That threat was offset somewhat by data showing government spending climbed 1.4 per cent in the quarter and added a much-needed 0.4 percentage points to GDP.
The margins of error are small given analysts had already thought the economy grew a slight 0.3 per cent in the quarter as high borrowing costs and stubborn inflation squeezed consumers and the home building industry.
Annual growth was seen slowing to just 1.0 per cent, from 1.1 per cent, lows last seen during the pandemic and the global financial crisis of 2008. The GDP report is due on Wednesday.
The downturn has been largely engineered by the Reserve Bank of Australia (RBA) which hiked interest rates to a 12-year high of 4.35 per cent in an effort to curb demand and price pressures.
Inflation, however, has been slow to respond and was still up at 3.8 per cent in the June quarter, well above the RBA's target range of 2-3 per cent.
The central bank has repeatedly warned that interest rates cuts are unlikely for the remainder of the year unless inflation declines more quickly than it currently expects.
Markets are pricing in a one-in-three chance of an easing in November, and around a 72 per cent probability of a move in December, in part because almost all of the RBA's peers are likely to be well into easing campaigns by then.