A lower cost of funding via foreign liabilities, a higher return on overseas assets and falling capital goods imports should all support Australia’s current account over the next couple of years. However, we think that those tailwinds will all be overwhelmed by a renewed slump in the terms of trade. Our forecast is that the current account will fall from around 0.2% of GDP this year to -0.5% in 2020 and deteriorate further to -1% in 2021.
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