5 Sep 2019
$5.8 billion Current Account Surplus
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
The Current Account is essentially a measure of a country’s trade, the value of the goods and services it exports (income) versus the value of goods and services it imports (expenses).
A Current Account Surplus is good because income (exports) are higher than expenses (imports) while a Current Account Deficit is bad because expenses (imports) are higher than income (exports).
The exciting news is that Australia’s Current Account has for the first time since June 1975 changed from a deficit to posting a $5.8 billion surplus in the June 2019 quarter thanks to the huge exports of iron ore and coal followed by international education.
It took 44 years and 13 Federal Treasures to bring the Current Account Deficit back into a Current Account Surplus and let’s see how long it persists.
By comparison the United States Current Account has only been in deficit since the early 1990’s and is currently running at over US$500 billion (that is half a trillion dollars) which is bad because it is not possible to run expenses (imports) higher than income (exports) indefinitely.
Eventually, spending more than you earn must come to an end but it could still take decades or even a 100 years for this situation to be resolve provided that the United States can keep paying the interest on the trillions of dollars in debt that it is accumulating (current US Government debt US$21.4 trillion).
Click for chart.
Importantly, the key to remember is that when fear and panic take hold, that is when an investor is presented with the best opportunity to buy more quality assets at reasonable or better still discounted prices.
At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.