NZ posts largest quarterly surplus since records began

By NZPA

Thursday 27th June 2002

The Government was handed another election present by Statistics New Zealand today when it revealed the country's biggest quarterly balance of payments surplus since records began.

A surge in tourism and investment income helped pushed the March quarter to a surplus of $732 million, compared with December's deficit of $1.7 billion.

Statistics New Zealand which has been keeping records since 1965 said the previous biggest quarterly surplus was March 1989, when the result was a $298 million surplus.

Robin Clements, chief economist, UBS Warburg called the result "a shockingly good number".

According to a Reuters poll, they were expecting a median deficit of $189 million.

"My immediate thought was, `Oh dear, have they made a mistake?'. On the face of it, it will be positive for the currency. Right at the moment until we dig through it and find out which numbers are particularly volatile... but on the face of it -- good news," said Mr Clements.

The kiwi dollar rose a quarter of a cent to US48.90c after the news.

On an annual basis, the current account was in deficit of $2.7 billion -- 2.2 percent of GDP -- the best since June 1989 when it stood at 1.1 percent -- and far better than ecnomists' forecast of a $4.0 billion deficit, 3.3 percent of GDP.

"It's suggesting the export sector has been a little more resilient than we would have thought and it's also signalling the risk of the GDP number tomorrow is going to be skewed to the high side," said Stephen Koukoulas, a currency and credit markets research head at TD Securities.

Today's figures are in stark comparison to the country's position two years ago, when the deficit soared as high as 7 percent of GDP, an extremely high level by international standards that concerned economists and international credit agencies.

Main contributors to today's decrease in the deficit were an increased surplus in goods and services and rising net investment income.

Tourists spent more and arrived in greater numbers during the summer, boosting other services such as transport, Statistics New Zealand said.

New Zealand's earnings from offshore investments improved greatly and the amount earned by foreign investors decreased, largely because New Zealand companies were borrowing less from overseas subsidiaries. It was not a currency related change, said a Statistics NZ official.

New Zealand's net international investment position was a deficit of $92.3 billion against a revised deficit of $93.2 billion in the previous quarter.

On a seasonally adjusted basis the current account balance was in deficit to the tune of $466 million in the March quarter.

Economists still expect New Zealand's position to deteriorate by year's end.

"We are in a good position going forward, but with a rising exchange rate we will be exporting slightly less and importing slightly more, and the current account will widen out to around four percent of GDP," said Nick Tuffley, a Westpac senior economist.

National Bank economist Cameron Bagrie told National Radio that simply put, New Zealanders earned more than they spent overseas in the March quarter.

"Put that in perspective, that's the best quarterly surplus New Zealand's ever had... What's quite pleasing about it is the fact that the three traditional components of it -- your trade balance, your services balance and your investment balance -- are all tied together in a three-legged race."

That meant the lagged impact of the low exchange rate, high commodity prices, had supported the trade balance, while the services sector has benefitted from a strong rebound in the tourism sector.

New Zealand's "nemesis", the investment income balance, which was normally about an outflow of $2 billion, had improved quite sharply to around $1.3 billion.

"So the returns we're getting offshore are up quite sharply but the overseas guys investing in New Zealand, they're not doing quite so well."

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