NZ balance of payments deficit $2.3b in Sept quarter

By NZPA

Thursday 19th December 2002

New Zealand spent $2.30 billion more than it earned in the September quarter, Statistics New Zealand said when releasing balance of payments figures today.

The figure was exactly on economists' estimates and the September year deficit of $3.79 billion was almost exactly in line.

The September quarter deficit compares with a $580 million shortfall in the June quarter and $1.53 billion in the September quarter last year. It was the worst quarterly result since the September quarter of 2000.

The annual deficit is running at around 3 percent of gross domestic product, which is unchanged from the year ended September 2001.

The main factors driving the increase in the September quarter deficit were lower export receipts due to falling prices for primary products and higher import payments due to increased import volumes which have more than offset falling import prices.

Overall, the international investment position (New Zealand's balance sheet with the rest of the world) shows a rising gap between the value of New Zealand's investments abroad and overseas investment in New Zealand. This is mainly due to falls in the value of investments held by New Zealand fund managers in overseas sharemarkets.

Foreign investment in New Zealand increased by $2.8 billion in the quarter primarily in the form of debt securities issued by the banking sector here.

New Zealand investment overseas increased by $2.8 billion during the quarter but that was offset by the fall in the value of foreign investments.

New Zealand's foreign debt has increased from $97.9 million at June 30 to $99.6 billion at September 30.

During the quarter, there was a $1.8 surplus balance on goods and a $1.03 billion surplus on services. However, the balance of investment income was a $6.72 billion deficit.

There was a 6.3 percent fall in the value of goods exported in the quarter while imports increased by 2.2 percent.

Foreigners earned $2.18 billion from their investments in New Zealand in the quarter while New Zealanders earned just $461 million from their overseas investments.

Foreign earnings here were actually $182 million less than in the June quarter largely due to lower profits earned in New Zealand by foreign owned companies.

The news had no effect on the New Zealand dollar which was trading close to two year highs at US51.50c.

National Bank chief economist John McDermott noted New Zealand was borrowing a bit more from the rest of the world than it was a a few quarters ago but it was to be expected.

"We're finding it harder to sell our exports offshore in a weak world environment and at the same time our domestic economy is growing very well and we want to buy all those imported luxuries and so on.

"It (the data) doesn't change anybody's views. Everybody pretty much picked this one and we'll probably see the current account position deteriorate a little bit further from this point on but not to the levels we saw a few years ago when it got to 7 percent of GDP."

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