The current account surplus in Australia increased in Q4 last year thanks to a surge in coal and iron ore exports, lessening the recession risk in the country.

In addition, government spending was also heightened during the fourth quarter, helping to offset a sharp drag from inventories, according to data from the Australian Bureau of Statistics (ABS) published on Tuesday.

The latest findings show the country's current account surplus reached A$11.8 billion ($7.68 billion) in Q4, an increase from the upwardly revised A$1.3 billion in the prior quarter. This compares to predictions of a surplus of A$5.6 billion.

According to ABS, net exports, which were fuelled by elevated export prices and an increase in shipments of mining commodities, would add 0.6 percentage points to GDP in Q4, when analysts forecast they would only contribute 0.2 percentage points, Reuters reports.

The government spending over the quarter was up 0.4%, adding 0.1 percentage point to the country's GDP. This helped to counter a steep decline in mining inventories over the three months.

"Coupled with solid capex data and a modest boost from public demand, GDP growth should be positive, albeit unspectacular in tomorrow's print," stated Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.

Q4 GDP figures are due out on Wednesday. According to average forecasts there'll be a rise of 0.3%, which would result in an annual growth slowdown to 1.4%

Indeed, the slowdown in Australia's economy is a key reason why the central bank held interest rates steady at 4.35% last month, after hiking them 425 basis points since May 2022 within efforts to curb inflation. 

Markets appear confident that the tightening phase has reached an end, yet according to futures pricing, any potential rate easing isn't anticipated until September.