Wednesday 24th March 2010 |
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New Zealand's deficit on current account with the rest of the world remained at historically low levels for the year to December, although there was a dramatic swing between the September and December quarters as foreign-owned banks' tax avoidance settlements washed through the balance of payments statistics.
For the 12 month period, New Zealand recorded a deficit on current account of $5.5 billion, or 2.9% of Gross Domestic Product, down from $16 billion, or 8.7% of GDP, for the year to December 2008, making last year's result the lowest current account deficit since 2001.
In part, the result reflects a collapse in imports caused by recession in New Zealand that began before, and was exacerbated by, the global financial crisis.
For the December quarter, the seasonally adjusted balance of payments deficit on current account was $3.1 billion, compared with a $39 million surplus recorded in the September quarter, and which reflected payments totalling more than $2.5 billion from foreign-owned banks making tax payments after losing court challenges against the Inland Revenue Department.
The banks - ANZ National, Bank of New Zealand, ASB and Westpac - settled their claims with the IRD on Christmas Eve for $2.2 billion, a sum including both tax and accrued interest.
Statistics New Zealand figures showed for the first time that the final tax component of those payments was $1.6 billion. The banks had made payments of $2 billion in the June and September quarters, in anticipation of losing their legal battles, and were rebated $379 million in the December quarter once a settlement was achieved.
Also contributing to the largest increase recorded in investment income deficit ever recorded, was a significant increase in income earned by foreign investors in New Zealand after five quarters in which the investment income had been falling.
"Foreign direct investors earned a $2.3 billion profit from their New Zealand subsidiaries, of which $1.5 billion was reinvested as capital,” Statistics New Zealand reported.
"Company profits are returning to levels seen before the effects of the tax charges the financial crisis."
Net international liabilities recorded their largest fall ever recorded, tumbling $5.3 billion between the September and December quarters to $167.5 billion, or 90.3% of GDP, with changes in the value of financial derivatives contributing substantially to the reduction.
Stripped of the unrealised changes in derivatives, the country's net external debt position still improved somewhat at $154.9 billion, falling $1.7 billion from September levels, and $1.1 billion lower than the $156 billion recorded in December 2008.
Statistics NZ said the underlying trend in the annual balance of payments deficit on current account had now returned to patterns seen about six years ago, when the balance had tended to run at around $3 billion to $4 billion a year.
Businesswire.co.nz
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