In the first quarter of 2015, the current account deficit of Australia narrowed to 5% of the GDP, as compared with Q4 2015’s upwardly revised deficit of 5.5%. Australia’s trade deficit narrowed to AUD 8.1 billion in Q1 2016 from AUD 10.9 billion in Q4 2015. This helped improve the current account performance.

Net exports positively contributed 1.1 percentage points to the Q1 GDP growth, above market expectations. The volatility pattern continues as net exports had not contributed to the GDP growth in Q4, following a positive contribution of 1.5 percentage points in Q3 2015 and a subtraction in the prior quarter.

The exports volume increased in the first quarter by 4.4%. Robust export volumes for services and resources mainly supported the overall exports volume. Resource exports throughout the board witnessed a solid growth in volume, except for metals. Exports volumes of manufacturing also increased, whereas volumes of rural export declined.

Meanwhile, prices of exports declined in the first quarter by 5%, the biggest quarterly drop since mid-2014. On an annual basis, export prices were down 11.3%. Therefore the exports value declined 0.7% q/q.

Volume of imports dropped 0.8%, mainly due to a 7% decline in imports of capital goods. This is in line with weak non-mining business investment. Imports of consumption goods remained the same in Q1. Imports of services declined slight, contributing 0.1 percentage points to the annual GDP growth in the first quarter. Meanwhile prices of imports declined 3.1% q/q. Total imports’ value fell 3.8% q/q.

In all, Australia’s first quarter terms of trade declined 1.9% q/q and 11.5% y/y. The terms of trade is likely to gradually improve from present levels, said ANZ in a research report.