NZ current account deficit narrows in 4th qtr on primary exports, tourism spending recovery

Wednesday 14th March 2018

New Zealand's current account deficit narrowed in the fourth quarter as goods and services exports were fuelled by a recovery in primary exports and spending by tourists.

The deficit was $2.77 billion in the three months ended Dec. 31 versus a revised third-quarter deficit of $4.83 billion, Statistics New Zealand said. Economists polled by Bloomberg predicted a fourth-quarter current account deficit of $2.5 billion. The kiwi was little changed at 73.24 US cents as at 11am from 73.27 cents immediately before the release.

Stats NZ said the annual deficit was $7.72 billion, or 2.7 percent of gross domestic product versus an annual deficit of $5.99 billion, or 2.2 percent of GDP, in the prior year, and against economists' expectations for an annual deficit of 2.6 percent of GDP. The wider annual deficit was due to a net outflow of primary, or investment, income and secondary income - which includes international transfers such as non-resident withholding tax - partly offset by a higher surplus from international trade of goods and services.

The biggest quarterly movement was in the services balance, which expanded to a surplus of $1.07 million versus a revised deficit of $48 million in the prior quarter as service exports rose to a record $5.8 billion on increased spending from overseas visitors from $4.8 billion in the third quarter and service imports slipped to $4.7 billion from $4.9 billion in the prior quarter.

The goods balance was bolstered by increased exports driven by dairy products and logs outpacing a rise in imports of transport equipment machinery and oil, narrowing the deficit to $1.2 billion in the fourth quarter from a deficit of $2.1 billion in the prior quarter. Exports rose to $14.7 billion from $12.1 billion in the prior quarter, while imports advanced to $15.9 billion from $14.3 billion three months earlier.

The financial account balance, which shows net investment flows, was a surplus of $1.5 billion in the three months to Dec. 31 versus a revised surplus of $2.1 billion in the prior quarter, due largely to the Treasury withdrawing reserve assets to repay maturing debt.

The balance on the capital account was a $19 million deficit in the December quarter versus a revised $14 million deficit in the prior quarter.

Foreign investment in New Zealand showed a deficit of $43 million in the December quarter versus a revised surplus of $180 million in the three months to Sept. 30.

New Zealand’s net international liability position was $155.2 billion or 54.8 percent of GDP as at Dec. 31 from a revised $156.2 billion or 56 percent of GDP at Sept. 30.

The value of New Zealand’s international assets was $251.6 billion as at Dec. 31 versus $245.1 billion in the three months to Sept. 30. The increase in assets was due to a $3.6 billion increase in the market price of our assets, caused by the performance of major overseas stock market indexes and a $1.9 billion increase in value due to the New Zealand dollar depreciation.

The net external debt position – excluding financial derivatives and equity – was $149.6 billion or 52.8 percent of GDP at Dec. 31 versus a revised $150.5 billion or 53.9 percent of GDP at Sept. 30.

Increased lending by New Zealand companies to their direct investors overseas was a main contributor to a smaller net external debt position, Stats NZ said. The country’s external lending increased $1 billion in the December quarter to $121 billion.

(BusinessDesk)

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