Annual current account deficit 2.3% of GDP in December

Wednesday 23rd March 2011

The current account deficit stood at 2.3% of gross domestic product (GDP) in the year to December, but it was 4.1% of GDP if reinsurance claims after the September earthquake in Canterbury are excluded.

Statistics New Zealand (SNZ) today put the seasonally adjusted current account deficit for the December quarter at $2.81 billion, and the actual current account deficit for the quarter at $3.52 billion.

This was wider than the market was expecting and the NZ dollar fell on the news.

The seasonally adjusted quarterly deficit compared a surplus of $1.7 billion in the September quarter.

"We have revised our estimate of expected reinsurance claims for the September 2010 quarter from $1.7 billion to $3.6 billion after receiving updated information from the insurance industry," balance of payments manager John Morris said.

"All insurance claims resulting from an event such as an earthquake are recorded in the period the event occurs in."

A separate estimate will be recorded in the March 2011 quarter for the reinsurance claims arising from the February 22 Canterbury earthquake.

Excluding the overseas reinsurance claims, the December quarter seasonally adjusted deficit rose $990 million from the September quarter.

The main reason was an increase in income from foreign investment in New Zealand, largely because profits earned by foreign-owned corporates rose.

There was also a smaller surplus on trade in goods and services in the latest quarter. Imports of goods increased, due to several high-value vessels and aircraft being purchased during the quarter.

Spending by overseas tourists fell to its lowest level in nine years, with falls in both the number of visitors and their length of stay.

For the December 2010 year, the current account deficit was 2.3% of GDP. Without the reinsurance claims resulting from the September earthquakes, the deficit was 4.1% of GDP.

The current account deficit is a measure of trade and capital flows. Tomorrow, Statistics NZ is releasing GDP data for the December quarter.

NZPA

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