NZ balance of payments deficit $624 million in June quarter

By NZPA

Thursday 26th September 2002

New Zealand spent $624 million more than it earned in the June quarter, Statistics New Zealand said when releasing balance of payments figures today.

The June quarter figure was close to economists' estimates, and the June year deficit of $3.004 billion was almost exactly in line.

Although the annual deficit has swollen from $2.595 billion in the March quarter, at around 2.5 percent of gross domestic product (GDP), economists said it was a level New Zealand could comfortably live with.

The March quarter deficit was revised up to $836 million from $732 million.

The department also released merchandise trade data for August today, which showed a sharp and possibly worrying deterioration in the trade position.

Instead of an estimated deficit of $200 million, there was a $542 million deficit.

That resulted from higher imports of cars and crude oil and a decline in exports.

Exports fell to $2.41 billion in August from $2.55 billion in July and against $2.64 billion in August 2001.

Imports in August rose to $2.92 billion from $2.82 billion in July and against $2.74 billion in August 2001.

While August is traditionally a deficit month, this August the trade deficit was equivalent to 22.5 percent of exports.

The value of car imports rose by 29 percent from $344 million to $443 million following a similar rise in $443 million.

Statistics New Zealand said the seasonally adjusted June quarter current account deficit was $805 million, $445 million larger that the March quarter deficit.

The main contribution to the larger deficit was the increase in income and current transfers deficit. This was partially offset by the increase in the goods and services surplus.

A larger investment income deficit was the result of foreign investors earning more from New Zealand investments and a fall in the earnings of New Zealand investors from their overseas investments.

Income from New Zealand investments abroad fell to $529 million from $726 million in the March quarter, while foreign investment in New Zealand rose to $2.326 billion from $2.050 billion.

There were higher volumes exported in the June quarter, offset by lower prices to produce a $64 million higher surplus than the March quarter.

The services surplus balance fell $22 million from the March quarter. The main feature was a $71 million fall in earnings from transport services which offset a rise in travel receipts.

There was a net flow of $146 million New Zealand investment abroad against a net inflow of $285 million into New Zealand.

The capital inflow account rose to $690 million from $520 million in the June 2001 quarter mainly due to the Government selling its embassy residencies in Paris and London.

Deutsche Bank senior economist Darren Gibbs said today's figures marked the beginning of a trend into larger deficits.

While it was the first quarterly increase in New Zealand's current account deficit since March 2000, the deficit was forecast to double to a less tenable 5 percent of GDP over the next year.

Mr Gibbs said the worsening position would be due to a drop off in world commodity prices, particularly in the key dairy sector, along with a growth in imports outstripping exports.

The New Zealand dollar was little moved by the current account data, rising to US47.31c by 11am from US47.27c earlier today.

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