GDP drop likely as CAD worsens
The increasing current account deficit, the discrepancy between the value of goods imported and that of goods exported, is widening according to recent findings. The continued widening of the country’s terms of trade can be considered an indicator to a possible drop in gross domestic product (GDP) of the country.
Seasonally adjusted data shows a $10.447 billion CAD for the first three months, up from original predictions of $10 billion. The growing CAD has been blamed on the spate of devastating natural disasters in Queensland which have negatively impacted on the state’s coal and agricultural production, leaving the state with a $6 billion reconstruction bill and a full 1% off predicted growth.
The ABS found ‘In seasonally adjusted chain volume terms, the net goods and services deficit rose $7,781m to $9,089m in the March quarter 2011. This is expected to detract 2.4% from growth in the March quarter 2011 volume measure of Gross Domestic Product.’
The ABS found that export values from Queensland have dropped $73.8 billion in the December quarter to $71.8 billion in the March quarter after extensive damage from cyclone Yasi and the subsequent flooding.
The Financial Review has estimated that the economy is due to experience its largest drop in exports in over 40 years, coupled with the largest contraction since the 1990’s.