/www.bloomberg.com/ By Victoria Batchelor
Sydney, Nov. 29 (Bloomberg) -- Australia's current account deficit widened to the largest in more than two years as imports rose and falling commodity prices plus a drought cut export earnings.
The deficit in goods, services and investment widened to A$7.87 billion ($4.41 billion) in the three months ended Sept. 30, the largest since the first quarter of 2000. That's up from a revised A$7.31 billion shortfall the previous quarter, the Australian Bureau of Statistics said.
The gap is expected to worsen as a drought across one-third of Australia reduces the amount of grain, cotton, wool and milk available for export and as weaker global demand crimps earnings at exporters such as BHP Billiton, the world's largest resources company. A widening shortfall may weigh on the currency, which has gained 10 percent against the U.S. dollar this year.
``The current account deficit will get wider because of the worsening trade position, and that might start to put a bit of pressure on the currency,'' said Su-Lin Ong, senior economist at RBC Capital Markets. ``Imports are outstripping export growth with the initial effects of the drought also starting to impact.''
The deficit widened to 3.8 percent of gross domestic product, up from 3 percent of GDP in the second quarter. The current account shortfall represents money Australia has to borrow overseas to finance investment not covered by savings.
Export Outlook `Difficult'
Last month, BHP said profit in the quarter ended Sept. 30 fell 9 percent as coal prices slumped and it cut copper output because of weak demand. The company said ``the current quarter will be just as difficult as the last.''
Exports make up one-fifth of the economy of Australia, which is the world's biggest exporter of beef, iron ore and wool, and second largest of wheat.
The Australian dollar bought 56.10 U.S. cents at 12:20 p.m., down from 56.13 cents before the report's release. The yield on the 6.5 percent government bond maturing in May 2013 rose 3 basis points, or 0.01 percentage point, to 5.69 percent.
The report showed the change in the trade balance, or so-called net exports, will detract 0.3 percentage points from economic growth in the third quarter. Economists surveyed by Bloomberg News expected a 0.1 percentage point detraction.
The GDP report will be released on Wednesday and is expected to show the economy expanded 0.9 percent in the third quarter from the previous three months and 3.5 percent from a year ago, according to the median forecast of 10 economists polled by Bloomberg News before today's report.
`Rapid Deterioration'
The current account deficit was expected to widen to A$7.8 billion, according to the median forecast in a Bloomberg News survey of 21 economists. The current account deficit is the broadest measure of international trade because it incorporates financial transactions.
``The relatively strong growth in Australia compared with the rest of the world, plus the drought, is resulting in a fairly significant and rapid deterioration in our trade balance,'' said Shane Oliver, chief economist at AMP Henderson Global Investors.
The report showed the goods and services deficit widened to A$2.61 billion from a revised A$2.13 billion gap in the second quarter. The net income deficit widened to A$5.24 billion in the third quarter from a revised A$5.18 billion in the previous three months.
Meantime, the country's net foreign debt rose to A$347.16 billion from a revised A$330.46 billion in the second quarter.