Wednesday 17th September 2014
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The annual deficit in New Zealand’s dealings with the rest of the world fell, in line with consensus forecasts, to 2.5 percent of gross domestic product in the year to June 30, hitting what economists expect will prove to be a cyclical lowpoint.
Falling prices for key export commodities, especially dairy products, and a weaker New Zealand dollar are expected to see the balance on the current account rise in future quarters from the lowest annual out-turn since the year to December 2010, when a deficit at 2.3 percent of GDP was recorded.
Reflecting falling dairy prices and a large revision to investment flows into New Zealand from offshore, the deficit on the current account for the three months rose by $1.4 billion from the March quarter, to stand at $2 billion for the quarter.
For the year to June, the current account deficit was $5.8 billion, or 2.5 percent of GDP, compared with 2.7 percent of GDP in the year to March.
The figures are among a slew of last minute key economic indicators ahead of this Saturday’s general election. Tomorrow will see the release of GDP figures for the June quarter, which consensus forecasts expect will be relatively weak at 0.5 percent for the quarter.
Net migration figures due Friday are expected to show a continuing strong net inflow as fewer New Zealanders leave for jobs overseas and more international migrants come here.
“Both prices and volumes of dairy product exports fell in the latest quarter,” said Statistics New Zealand. “Exports of goods fell $1.1 billion from the previous quarter’s record high.”
Dairy prices have fallen roughly 50 percent at global auctions since February this year, although last night’s GlobalDairyTrade auction saw a pause, with prices slightly rebounding from the previous auction, a fortnight ago.
The primary income deficit was $2.62 billion for the quarter, little changed from the three months to March 2014, with imports and exports of services both falling.
Net liabilities to the rest of the world fell to their lowest level in almost 13 years at June 30, measuring $149.7 billion, or 65.3 percent of GDP, compared with $151 billion, or 66.9 percent of GDP, at March 31.
This was “due to changes in the value of New Zealand’s overseas assets and liabilities, including an increase in the value of overseas shares owned by New Zealand investors, more than offsetting a net inflow of foreign investment,” the official statistician said.
However, the country’s net external debt position continued to deteriorate, at $142.3 billion, or 62.1 percent of GDP in the June period, $2 billion larger than in March, “mainly due to increased overseas borrowing (in the form of issuing debt securities) by New Zealand banks during the quarter.” The March figure itself was also revised upwards by $3.08 billion from that originally reported.
Statistics NZ now separately reports outstanding global reinsurance sums owing in the aftermath of the Canterbury earthquakes.
Of $19.7 billion of identified reinsurance claims – an increase of $600 million since March – some $14.8 billion have been settled, leaving $4.9 billion still to arrive.
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