Current account deficit rises to $16.1bn

Rising freight costs have hit New Zealand's current account deficit, which rose to $16.1 billion for 2008.

Falling tourism numbers and higher freight costs have contributed to a $16.1 billion current account deficit for the year ended December 2008 - 8.9 per cent of GDP, says Statistics NZ.

This compares with a deficit of $15.5 billion for the year ended September 2008, and a deficit of $14.4 billion -8.2 per cent of GDP- for the year ended December 2007.

Exports of goods increased during the year, with higher values of dairy products behind the rise. This was offset by an increase in the cost of goods we import - mostly fuel.

The current account, also known as the balance of payments, measures all of New Zealand's transactions with the outside world.

The annual deficit was $16.07 billion, which amounted to 8.9 per cent of gross domestic product, up from 8.6 per cent for the year ended September.

The figures were close to the median forecasts in a Reuters poll of economists.

SNZ said the seasonally adjusted current account deficit was $3.77b in the December quarter, $236m smaller than the September quarter deficit of $4b.

The narrowing of the deficit in the latest quarter was mostly due to an increase in exports of goods, partly offset by an increase in imports of services, SNZ said today.

BNZ markets economist Mark Walton said the December quarter figure was probably the worst of the deficit. While it may trade sideways for a couple of quarters, over time the deficit would improve.

ASB chief economist Nick Tuffley said the weaker services balance could be an early sign that tourism earnings were starting to wane.

"In the short term the current account is likely to remain wide, but in the second half of this year the annual current account is likely to be narrowing in, with that trend continuing over a couple of years," he said.

The goods deficit was a seasonally adjusted $177m in the December quarter, $628m smaller than the September quarter deficit.

Exports of goods increased $507m in the latest quarter, while imports of goods were down $121m.

The increase in export values for the December quarter was mainly due to a rise in the value of dairy products, with prices up 5.8 per cent while volumes also increased.

A rise in the value of forestry products was the other main driver behind rising export values, due to an 11.2 per cent increase in prices.

Partly offsetting the general rise in export prices was a fall of 31.6 per cent in the prices for petroleum and petroleum product exports, the largest quarterly fall since June 1986.

Total merchandise export volumes dropped 1.8 per cent in the December quarter.

While import prices rose 3.4 per cent in the quarter, that was more than offset by a fall in volumes, with the main driver being lower car volumes, SNZ said.

Services had a seasonally adjusted deficit of $511m in the December quarter, an increase of $243m from the September quarter deficit.

Services imports were up $163m, partly due to a $60m rise in transportation services, reflecting sea freight prices partly caused by the depreciating New Zealand dollar.

A fall of $80m in services exports was caused by a decrease in travel services exports, due to falls in the number of overseas visitors coming to this country and the total number of days spent here.

Net overseas liabilities of $167.7b at December 31 were $15.1b, or 9.9 per cent, larger than a year earlier, SNZ said.

Net international debt increased 14 per cent from December 31 2007 to $156.3b at the end of 2008. Net equity liabilities fell 26.1 per cent to $11.4b.

The investment income deficit of $3.2b in the latest quarter was $58m smaller than the September quarter deficit.

Foreign direct investors' earnings from their shareholdings in this country were $267m lower in the December quarter than in the previous three months. That was offset by a $176m fall in New Zealand investors' income from portfolio investment abroad.

- NZPA