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

Wednesday 14th March 2018

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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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