NZ posts widest current account deficit since 2009, in line with expectations

Wednesday 19th December 2018

New Zealand posted its widest annual current account deficit since 2009, as the rising cost of imported fuel helped narrow the nation's the goods and services surplus.

The annual deficit widened to $10.5 billion, or 3.6 percent of gross domestic product, versus an annual deficit of $7.4 billion, or 3.3 percent of GDP, in the prior year, Statistics New Zealand said. Economists had anticipated the widening shortfall, projecting an annual deficit of 3.6 percent of GDP in a Bloomberg poll.

The goods and services balance remained in the black with the country earning slightly more from exports such as meat, dairy and logs, than what was spent on imported goods. However, that surplus narrowed to $451 million from $2.6 billion a year earlier.

Stats NZ said the income component of the current account - which measures the income New Zealanders earn overseas against what foreigners earn in New Zealand - also contributed to the wider deficit.

“The income that foreign investors earned in New Zealand increased more than the income New Zealand investors made abroad,” said international statistics senior manager Peter Dolan.

According to Stats NZ, income from foreign-owned New Zealand companies was up $1.6 billion on the year at $19.4 billion. “Despite large bank profits, it was non-financial companies leading the increase, not the banks,” said Dolan.

The $11 billion income deficit compared to a $10 billion shortfall a year earlier. That includes the primary income component of domestic versus foreign earnings on investments, and the secondary income component that covers international transfers such as non-resident withholding tax.

In 2009, the current account deficit dropped from a record peak of 7.8 percent of GDP to 2.2 percent and has hovered between 2 percent and 4 percent since.

On a quarterly basis, the unadjusted deficit was $6.1 billion in the three months to Sept. 30, versus a revised second-quarter deficit of $1.6 billion, Stats NZ said.

The goods balance widened to $3.2 billion deficit in the September quarter from a surplus of $193 million in the June quarter. The services balance showed a deficit of $300 million versus a surplus of $912 million.

In seasonally adjusted terms, however, the current account deficit was $2.56 billion in the September quarter, down from $2.66 billion in the June quarter.

According to Stats NZ, the seasonally adjusted goods deficit was $997 million in the September quarter, $343 million narrower than in June. This was due to a $750 million rise in goods exports as the value of dairy, meat and log exports rose. Crude oil led the $407 million increase in goods imports, it said.

New Zealand’s net international liability position was $156.2 billion, or 53.7 percent of GDP, versus $154.5 billion at the end of June or 53.6 percent.

The value of New Zealand’s international assets was $269.2 billion as of Sept. 30, versus $270.5 billion at the end of June. The fall was due to a withdrawal in assets held abroad and financial derivative valuation changes.

(BusinessDesk)

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