The deficit between what we earn overseas and what we spend remains at levels generally seen as too high but has reduced by more than economists were forecasting

The deficit between what we earn overseas and what we spend as a country still remains at levels seen as too high - but it has reduced by more than economists were expecting.

Statistics NZ reports that in the 12 months to March 2025 our current account deficit was $24.7 billion, 5.7% of our GDP.

This compares with a revised-down $26.2 billion deficit in the year ended December 2024 (6.1% of GDP).

Economists had been expecting the deficit to reduce to around 5.8%-6.0%.

A current account deficit indicates that New Zealand is spending more than it is earning overseas. The size of the current account balance in relation to GDP shows its significance to New Zealand’s overall economy. 

Credit rating agencies have previously expressed concern about the levels of our current account deficit. And the significance of this is that if the ratings agencies get too bothered about the levels they could reduce our sovereign credit rating and this would make it more difficult and expensive for the country to borrow offshore.

But for the moment the deficit is continuing to come down.

BNZ economist Matt Brunt noted that the 5.7% of GDP figure is now well below the peak of 9.2% seen in December 2022, largely due to high commodity prices, strong primary production and the recovery in international tourism.

"We expect the deficit to continue narrowing towards 4% over the next year," Brunt said.

He said despite the fact the deficit is falling rapidly, the rating agencies still have some concerns around how much of it is structural.

"It is important to note that a deficit itself is not necessarily a bad thing. It depends how the funds are being used and whether they are achieving a sufficient return over time. But a large and persistent deficit can increase vulnerability and risk. It’s the possibility of large deficit persistence that will maintain the attention of the rating agencies, with S&P recently noting that New Zealand's fiscal and current account deficits could weigh on its credit rating."

Stats NZ said that in the March 2025 quarter the seasonally-adjusted current account deficit narrowed by $53 million to $5.5 billion.

“The value of New Zealand goods exports increased in the March 2025 quarter. However, rising export values were partly offset by increases in goods imports,” Stats NZ's international accounts spokesperson Viki Ward said.

“The March 2025 quarter current account deficit is very similar to the December 2024 quarter.”

The value of services New Zealand imported from the rest of the world increased, while the value of services exported decreased in the March 2025 quarter.

In the March 2025 quarter, foreign investors earned more in dividends and interest from their New Zealand investments, than New Zealand investors did from their investments overseas.

The seasonally adjusted goods deficit narrowed to $0.6 billion in the March 2025 quarter, following a deficit of $1.7 billion in the December 2024 quarter.

In the March 2025 quarter, the seasonally adjusted services balance was a deficit of $645 million, compared with a surplus of $47 million in the December 2024 quarter.

At March 31, 2025, New Zealand’s net international investment liability position was $212.2 billion, compared with $213.6 billion as at December 31, 2024.

In the March 2025 quarter, the value of New Zealand’s international assets decreased by $6.4 billion to $434.3 billion. Meanwhile, New Zealand's liabilities to the rest of the world also decreased by $7.7 billion to $646.5 billion.

“Global market uncertainty, followed by volatile stock markets, impacted the value of New Zealand’s international assets and liabilities,” Ward said.