Lower prices for goods exported meant New Zealand’s current account deficit worsened during the September quarter, while the country’s net international liabilities rose by NZ$10 billion due to rising offshore borrowings by Australian-owned banks, which increased their profits through the quarter.
Figures released this morning by Statistics New Zealand show a seasonally adjusted current account deficit of NZ$2.7 billion in the September quarter, NZ$0.7 billion higher than the June quarter.
That contributed to an annual current account deficit of NZ$8.7 billion, or 4.3% of GDP, in the year to September, compared to a deficit of NZ$7.4 billion, or 3.7% of GDP, in the year to June 2011.
The annual NZ$8.7 billion deficit in the year to September is the highest annual deficit since a NZ$10.4 billion deficit in the year to June 2009.
Economists polled by Reuters had been expecting an annual current account deficit of 3.9% of GDP.
More overseas borrowing
A current account deficit means that overseas expenditure by New Zealand exceeded its earnings from overseas. To finance this spending, New Zealand borrowed from overseas in the September quarter, mostly through the banking sector.
At September 30, New Zealand’s international liabilities exceeded its assets by NZ$148.2 billion, or the equivalent of 72.9% of GDP. This was up from NZ$138.4 billion (69.0% of GDP) at June 30.
“This increase in the net liability position is mainly due to more borrowing by the banking sector. In addition, falling overseas sharemarkets decreased the market value of New Zealand’s equity investments abroad by NZ$4.1 billion,” Stats NZ said.
The banking sector had reduced its overseas borrowing through the previous three quarters, Stats NZ said.
Meanwhile those banks increased their profits through the quarter, Stats NZ said.
Big banks made NZ$958 mln combined profit in Sept quarter
New Zealand’s ‘income deficit’ was NZ$2.825 billion in the September 2011 quarter, NZ$380 million larger than the June 2011 quarter deficit. Foreign investors earned NZ$4.220 billion from their New Zealand investments, and income earned from New Zealand investment abroad increased to NZ$1.395 billion, Stats NZ said.
“There was a NZ$441 million increase in foreign investors’ earnings from New Zealand this quarter, mainly due to overseas-owned banks making higher profits. In addition, overseas portfolio shareholders received higher dividend payments from New Zealand companies,” Stats NZ said.
Among the big four Australian owned banks, ANZ New Zealand recorded a NZ$103 million, or 42%, jump in September quarter profit versus the same period last year to NZ$350 million, BNZ's profit soared to NZ$285 million from just NZ$26 million, Westpac New Zealand's profit doubled to NZ$146 million from NZ$73 million, and ASB's profit rose 18% to NZ$177 million.
Falling goods exports
The larger deficit in the September quarter from June was mainly due to a fall in the goods surplus, as lower prices for exports of meat, dairy, and forestry products contributed to a NZ$0.6 billion fall in the value of goods exported. New Zealand’s total exports of goods were valued at NZ$11.7 billion during the September quarter, Stats NZ said.
Exports of services increased NZ$0.2 billion through the September quarter due to more overseas visitors visiting New Zealand for the Rugby World Cup, Stats NZ said.
Balance of payments ratios
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7 Comments
Report: "This increase in the net liability position is mainly due to more borrowing by the banking sector"
But our domestic savings are increasing and, according to the RBNZ, debt growth is flat or negative (agriculture). So where is the $8,700,000,000 additional debt showing up? The national governments books of course - Jonkey & Double Dipton putting us all in hock to the international banking cartell. But she'll be sweet 'cause next year (it's always next year) we're going to have 5% GDP growth. Whatever!
A fairer society - PM !
Feeding the rich, super rich and the banks doesn’t make us wealthier as a nation - PM. The government under Key doesn’t perform and no wonder the deficit is growing.
Only production - solid manufacturing combined with the reduction of red tape and salaries of public servants and inequality, will stabilise our economy with the prospect of balancing our budget.
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