KEY POINTS:
New Zealand's actual current account deficit worsened to $4.6 billion in the September quarter, Statistics New Zealand (SNZ) figures out today showed.
The current account, also known as the balance of payments, measures all of New Zealand's transactions with the outside world. In the June quarter the actual deficit was $3.1b.
The annual deficit for the year to September was $14.4 billion, 9.1 per cent of GDP. That is an improvement on the $15.1 billion, or 9.7 per cent of GDP, recorded in the June year.
It was the first time since March 2003 that the year-ended deficit had narrowed between quarters, SNZ said.
The figures are better than economists had expected with the median in a Reuters poll being a deficit of $5 billion for the quarter and a deficit of $15 billion, or 9.5 per cent of GDP, for the year.
The seasonally adjusted current account deficit for the September quarter was $3.1b, $418 million lower than the June quarter deficit.
This was mainly due to an improvement in the investment income deficit, SNZ said.
There was little change in the seasonally adjusted goods balance, with both exports and imports increasing by similar amounts this quarter.
A $463m narrowing of the investment income deficit was driven by lower profits earned by foreign-owned New Zealand companies, combined with an increase in earnings from New Zealand's investments abroad.
The value of goods exports rose $242m from the June quarter, with export volumes driving the increase.
Major export commodities contributing to the rise in export volumes were forestry products, and food and beverages, SNZ said.
Import prices and volumes both contributed to the $240m increase in the value of goods imports.
The seasonally adjusted goods balance for the quarter was a deficit of $654m, barely changed from the June quarter's $656m deficit.
The September quarter current account deficit was financed by a $4.4b net inflow of capital into New Zealand during the quarter, with $7.8b of foreign investment into this country exceeding $3.4b of New Zealand investment overseas.
The lower annual deficit was mainly due to a $1.4b increase in the value of goods exports, partly offset by a $700m rise in the value of goods imports.
At September 30, New Zealand's balance sheet with the rest of the world was in a net liability position of $137.1b, a rise of $9.7b from a year earlier.
Net overseas debt (lending less borrowing) now formed 88.4 per cent of New Zealand's net liabilities to overseas investors, compared with 82.9 per cent a year ago.
The New Zealand dollar, already at an 11-month high, headed up on the news.
It had been flirting with US69.50c in morning trading but after the better-than-forecast figure, rose to US69.66c.
"The annual deficit is a bit lower than expected but still very high and still stands out there as pretty ugly," said First NZ Capital economist Jason Wong.
ANZ chief economist Cameron Bagrie said the data was a double-edged sword.
"Obviously the headline was an awful lot better than market expectations but I'd just be a little bit more cautionary. "The reason it was better was lower profitability, which is a sign the NZ economy has turned and eventually lower profitability will flow through to less jobs.
"Also, looking at the service composition suggests the potential for an upside surprise in Q3 GDP is going to be mitigated."
AT A GLANCE
* The seasonally adjusted current account deficit was $3,114 million in the September 2006 quarter.
* This deficit was $418 million lower than the June 2006 quarter deficit, mainly due to an improvement in the investment income deficit.
* A $4.4 billion net inflow of capital into New Zealand was the result of $7.8 billion of foreign investment into New Zealand during the quarter exceeding $3.4 billion of New Zealand investment abroad.
* For the year ended September 2006 current account deficit was $14.4 billion (9.1 per cent of GDP), compared with the year ended June 2006 deficit of $15.1 billion (9.7 per cent of GDP).
- NZPA
