Despite deficit Australia signals recovery

Australia's current account deficit increased beyond expectations in the three months through June as exports of coal, iron ore and farm goods plunged.

The shortfall on goods, services and investment increased to $13.3 billion which is more than double that of the first quarter, according to the Australian Bureau of Statistics (ABS).

Analysts expect central bank governor Glen Stevens to keep the benchmark interest rate unchanged at the 49-year low of 3 per cent to stimulate domestic demand that may be flagging on the back of cuts in government handouts to consumers.

Net exports have taken 0.2 per cent off the gross domestic product according to the statistics bureau.

Economists attribute blowout in the deficit to the global recession and weakening coal and iron prices. They say the Australian economy expanded in the second quarter but only marginally.

Exports were hit 19 per cent at $47.6 billion in the quarter with shipments of rural goods sliding 9 per cent, coal declining 26 per cent and iron ore falling 21 per cent.