NZ annual current account deficit at 4.8% of GDP, down from 5%

NZ annual current account deficit at 4.8% of GDP, down from 5%

New Zealand's current account deficit narrowed to NZ$10.1 billion in March, equivalent to 4.8% of Gross Domestic Product (GDP), Statistics New Zealand says.

The result is bang-on the expectation among economists.

SNZ said Increased exports of dairy products, together with the rising spending by overseas visitors, saw New Zealand’s seasonally adjusted current account deficit fall NZ$0.3 billion in the March 2013 quarter.

New Zealand's seasonally adjusted current account balance was a deficit of NZ$2.2 billion for the March 2013 quarter. This compares with a NZ$2.5 billion deficit for the previous quarter.

"Visitors to New Zealand spent more this quarter," acting balance of payments manager Matthew Haigh said.

"The rise in dairy exports was mainly due to increased volumes, although prices also rose for the first time in almost two years."

For the March 2013 year, New Zealand's current account deficit narrowed to $10.1 billion (4.8 percent of GDP). This smaller deficit than for the December 2012 year (when it was 5.0 percent of GDP) was mainly due to a fall in imports of petroleum and petroleum products.

As at the end of March 2013, New Zealand's net international liability position was NZ$146.7 billion (69.3% of GDP), compared with NZ$149.6 billion (71.4% of GDP) at December 2012.

"Almost a third of New Zealand's international assets are held in overseas sharemarkets. Rising prices in these markets helped boost our asset values by NZ$2.4 billion this quarter," Haigh said.

New Zealand's net external debt fell NZ$3.7 billion, to NZ$138.7 billion (65.6% of GDP) at 31 March 2013.

The fall in net external debt was mainly due to reduced borrowing by the banking sector. The net international liability position includes outstanding overseas reinsurance claims (as New Zealand's assets) from the Canterbury earthquakes. Total overseas claims are estimated to be NZ$18.6 billion, and almost half these claims had been settled at March 2013.

Westpac economist Nathan Penny said that over the rest of 2013 the deficit was expected to "zig-zag" around its current level.

"The drought will hit export volumes in the June quarter, widening the deficit, and then as the dairy price spike flows through in the September quarter, the deficit should recover its lost ground.

"From 2014 onwards, the deficit is universally expected to widen over the next couple of years as the Canterbury rebuild generates demand for imports and profits of foreign-owned NZ firms improve in line with stronger economic growth," Penny said.  

ASB senior economist Jane Turner said she expected  the goods balance to receive a temporary boost from stronger dairy export prices over the coming year.

"Beyond this, we expect the goods balance to remain steady and in surplus. The Terms of Trade are likely to stabilise at a reasonably elevated level.

"While the gradual recovery in the NZ economy will support import growth, we expect this growth to be matched by improved export performance as the global economy continues to recover and Chinese demand remains firm.

"The investment income balance may widen as the NZ economy improves, and this increases the outflow of profits to foreign-owned NZ companies. As a result, we expect a slight widening in the current account deficit to around 5.5% of GDP by the end of 2015," Turner said.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

4 Comments

Comment Filter

Highlight new comments in the last hr(s).

Visitors to New Zealand spent more this quarter," acting balance of payments manager Matthew Haigh said.
 
Those itinerant foreign property buyers are leaving their mark in more ways than one.

Imagine if our current account was in credit and was chronically so.  Run that scenario in your head. All the numbers would be different.   And commentary on this site would show New Zealand was quite a different place.  Also - I think it quite achievable.

New Zealand's net external debt fell NZ$3.7 billion, to NZ$138.7 billion (65.6% of GDP) at 31 March 2013.
 
It would be nice to talk about gross debt too. Net debt is fine when everything is going along nicely. But GROSS DEBT BECOMES NET DEBT WHEN THINGS GO WRONG. Sorry about shouting but I had rather hoped that message had got through by now.
 
Yes it's a pet beef of mine, but why do journalists and economists dumb things down so much when they are talking to the public? Why do they allow government bureaucrats to make themselves look clever by allowing them to talk about net debt but not gross debt; and about debt to GDP rather than debt to income?
 
Why, why, why?

Why, why, why?
 
An unnecessary rhetorical question, me thinks