Current account gap widens on drought impact

Photo / Richard Robinson.

New Zealand's current account deficit came in at a seasonally adjusted $2.2 billion for the three months to June 30, reflecting the impact on agricultural exports of the late summer drought.

The actual deficit was a quarterly $1.25 billion, smaller than economists' consensus forecasts of around $1.81 billion. For the year to June 30, the current account deficit shrank to $9.1 billion, or 4.3 per cent of gross domestic product, compared to a deficit at 4.5 per cent of GDP in the year to March 31.

The annual improvement reflected a substantial revision in the March quarter deficit, which came down from the $663 million gap initially reported to a final figure of $416 million and slowing investment income outflows in the most recent period.

"Foreign-owned companies I n New Zealand made lower profit in the latest year, and paid less interest on loans received from their overseas parents," Statistics New Zealand said in its official release.

The investment income deficit of $2.0 billion in the June quarter was $269 million lower than in the previous quarter.

The country's net international liabilities position remained stable at June 30 at $151.3 billion, or 71 per cent of GDP, compared with a revised figure of $151.6 billion at March 31.

However there were changes in the composition of that figure with the New Zealand government paying down debt and net private sector debt increasing, spurred by the first increase in net banking sector liabilities in six quarters.

The kiwi dollar was little changed at 82.35 US cents from 82.31 cents immediately before the release.

Net government debt to the rest of the world fell by $4.5 billion in the quarter to $7.8 billion, or 3.7 per cent of GDP, the first improvement in the official debt position since March 2011.

Net banking sector borrowing from overseas was up $4.4 billion to $108.3 billion, at $50.9 per cent of GDP.

The impact of the drought was the primary factor in a fall in exported goods of $498 million compared to the March quarter, as volumes fell by 18.1 per cent. Imports were down $119 million on the previous quarter.

The balance on services was a deficit of $155 million for the quarter, $27 million less than the previous quarter, and featured higher earnings from providing financial services to overseas clients and from merchanting services. Offsetting this was a $92 million increase in imports of services over the quarter, reflecting technical services related to oil extraction.