NZ annual current account deficit at 4.1% of GDP in September quarter, from revised 3.9% in June quarter

NZ annual current account deficit at 4.1% of GDP in September quarter, from revised 3.9% in June quarter

New Zealand's current account deficit widened to $8.8 billion for the year to September, equivalent to 4.1% of Gross Domestic Product (GDP), Statistics New Zealand says.

The result is generally in line with market expectations and follows changes to the methodology and extensive revisions of previous figures from Stats NZ. The changes to the methodology had the overall impact of reducing the size of previous deficits.

The latest current account figure compares with a revised $8.2 billion figure for the year to June, which represented 3.9% of GDP.

The seasonally adjusted current account deficit was $2.6 billion in the September 2013 quarter, which was a $0.3 billion larger deficit than in the June 2013 quarter, and the largest current account deficit since the December 2008 quarter, Stats NZ said.

ASB chief economist Nick Tuffley said the quarterly deficit was bigger than ASB had expected, though the cause "was a lumpy ‘one-off’ in imports".

"We see few implications out of the result."

Tuffley said the historical revisions made the long-term current account position look slightly more favourable. 

"The incorporation of newly-measured flows may, all other things equal, slightly reduce the reported current account deficit going forward.

"Even before incorporating any impact of the revisions we have been expecting the annual deficit to reduce further over the next year on the back of improved export earnings.  From late 2014 the deficit is likely to widen gradually as broader economic growth drives strong import demand and greater income outflows to foreign investors," he said.

Westpac chief economist Dominick Stephens and senior economist Michael Gordon said the annual deficit was broadly in line with market expectations, "with the positive revisions to history offsetting a larger quarterly deficit than the market was expecting. The [New Zealand dollar] was unmoved after the release". 

They said the narrowing of the current account deficit over history was a positive for perceptions of New Zealand's international position.

"We have long argued that New Zealand's current account deficit is overstated, and the revisions in today's release are just the latest in a series of improvements by Statistics NZ that have narrowed the reported deficit. 

"The implication is that the New Zealand economy is on stronger macroeconomic ground than was previously portrayed. In theory, this should be positive for the New Zealand dollar, and negative for Government Bond yields - a better balance of payments position may make international investors more predisposed to lend to New Zealand entities. "

Stats NZ said the increase in the deficit this quarter was mainly due to imports of goods and services increasing by more than exports.

"For the first time in five years, New Zealand imported more goods and services than we exported," balance of payments manager Jason Attewell said.

Goods imports increasing by more than goods exports also drove the increase in New Zealand's annual current account deficit.

Stats NZ said that in the latest release of the figures it had  included improvements to estimates for spending by international visitors and students in New Zealand. It had also included an estimate for imports of goods valued below the $1000 Customs threshold for the first time. The current account balance has been revised back to the June 1982 quarter.

"These data improvements decreased our average current account deficit as a percentage of GDP to 4.8% over the last 10 years, from 5.6%," Mr Attewell said.

At September 30, 2013, New Zealand's net international liability position was $150.1 billion (69.5% of GDP), down from 151.6 billion (71.2% of GDP) at June 30, 2013. The smaller net position in the latest quarter was driven by changes in the value of New Zealand's overseas assets and liabilities, rather than transactions through the financial account.

Within the net international liability position, the banking sector reduced their borrowing by $9.2 billion. As a result, the banking sector's net overseas debt fell to its lowest level since the March 2007 quarter.  

Stats NZ said total international reinsurance claims from all Canterbury earthquakes remained estimated at $18.7 billion. At 30 September 2013, a total of $12 billion of these claims had been settled with overseas reinsurers, leaving $6.8 billion of claims outstanding.

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Goods imports increasing by more than goods exports also drove the increase in New Zealand's annual current account deficit.
LOL - a very satisfactory state of affairs for a government relying on GST and asset sales to fund to a surplus? Crown proposals to extinguish debt and reduce future debt issuance is a vicious circle contradiction. No?