The deficit between what we earn overseas and what we spend has dropped to 6.4% of GDP, but remains at levels seen as too high by economists

The deficit between what we earn overseas and what we spend as a country has narrowed - but still remains at a level described by economists as unsustainably wide.

Statistics NZ reports that in the 12 months to September our current account deficit was $27.0 billion, down from a revised $27.6 billion in the 12 months to June 2024.

Our deficit has therefore reduced to 6.4% of our GDP, down from 6.6% as of the June quarter.

Stats NZ said in the September 2024 quarter New Zealand’s seasonally adjusted current account deficit narrowed by $0.9 billion to $6.2 billion. The detail of this was:

• seasonally adjusted goods deficit narrowed to $1.9 billion
• seasonally adjusted services deficit narrowed to $397 million
• primary income deficit narrowed to $3.5 billion
• financial account recorded a net inflow of $2.1 billion.

The seasonally adjusted goods deficit narrowed by $0.7 billion to $1.9 billion, driven by a $0.8 billion fall in goods imports.

"In the September 2024 quarter, New Zealand imported fewer cars than last quarter. Also contributing to the fall was transport equipment imports with no defence aircraft imported, which were recorded in the June 2024 quarter," Stats NZ's international accounts spokesperson Viki Ward said.

"There was a higher volume of petrol imports in this quarter."

Goods exports decreased by $0.1 billion, driven by meat and casein.

While economists are expecting that our current account deficit will gradually shrink over time, the extent to which we are spending more than we earn in the world has attracted the attention of credit rating agencies, who have previously stressed that they want to see that deficit coming down or else it could cause our sovereign debt ratings to come under review.

The deficit hit a peak of 9.2% of GDP in 2022 and has been falling slowly since.

In terms of New Zealand 'net international investment' position - representing the difference between New Zealand’s financial assets and liabilities with the rest of the world - we continue to have a 'net liability position'.

At 30 September 2024, New Zealand’s net international investment liability position was $208.6 billion (49.5% of GDP), $5.7 billion wider than $202.9 billion (48.3% of GDP) as at 30 June 2024.

The widening of the net international investment liability position reflected New Zealand’s international liabilities increasing more than its assets.

In the September 2024 quarter, we borrowed more from overseas than we acquired in overseas financial assets.

"Increases in share prices along with borrowing from and lending to overseas largely contributed to New Zealand’s international liabilities reaching $613 billion, and assets reaching $405 billion, which were new highs," Ward said.