Export earnings rose in the first two months of 2007, to be 2½ per cent higher than in the December quarter and 11 per cent higher over the year. All major components of exports increased, except for rural goods, which have been affected by the drought. There is likely to have been some weakness in exports during the month of March owing to cyclone-related disruptions to iron ore and oil exports. Overall, with export prices estimated to have risen only slightly, export volumes appear to have increased firmly in the March quarter, following growth of around 4 per cent over 2006.
Import volumes increased strongly in the December quarter and over 2006, driven by firm growth in domestic demand. Recent data indicate that the value of imports continued to rise in the March quarter. The strength in imports in the past two quarters has been broad-based, with imports of consumption goods picking up further in the March quarter, consistent with the recent retail trade figures.
The current account deficit widened to 5.9 per cent of GDP in the December quarter reflecting increases in both the trade deficit, resulting from strong import growth, and the net income deficit (NID).