KEY POINTS:
New Zealand's current account deficit eased to $2.22 billion in the March quarter, slightly better than economists had expected.
It contributed to a deficit for the year to March of $13.9 billion, 8.5 per cent of GDP, Statistics New Zealand (SNZ) data released today shows.
That compares with a deficit of $14.46b (9 per cent of GDP) for the year to the December quarter and $14.92 billion (9.6 per cent) for the year to the March 2006 quarter.
The March quarter is traditionally the best three months period for the current account. But today's figure was still worse than any March quarter in the past decade.
In a Reuters poll, the median prediction of economists had been for a March quarter deficit of $2.26b, and for the year of $13.92b or 8.6 per cent of GDP.
The current account, also known as the balance of payments, measures all of this country's dealings with the outside world.
When seasonally adjusted, the March quarter deficit was $3.62b, an increase of $50 million from the December quarter, SNZ said.
The larger deficit in the three months to March was due to higher imports of goods and services, and lower inflows of current transfers, partly offset by a smaller deficit on investment income.
A $65 million increase in seasonally adjusted imports of services in the latest quarter was largely due to more New Zealanders taking overseas trips.
The seasonally adjusted goods balance was a deficit of $882m in the March quarter, $95m wider than the December quarter deficit.
Seasonally adjusted, the value of exports of goods was $8.99b in the March quarter, up $305m from the previous quarter.
The main contributors to the increase in export volumes were dairy products and non-food manufactures, including casein and caseinates. Volumes of meat and non-fuel crude materials exported fell in the March quarter, SNZ said.
The seasonally adjusted value of imported goods increased by $400m from the December quarter to $9.87b.
Merchandise import volumes were up, due to increases in consumption goods and intermediate goods. Offsetting that was a fall in the price of petroleum and petroleum products for the second consecutive quarter, along with a fall in the price of mechanical and electrical machinery.
The smaller current account deficit for the year to March from a year earlier was mostly due to increased exports of goods, SNZ said.
Goods exports were up $4b in the March year, while goods imports increased $2.8b. Income earned by foreign investors from their New Zealand investments was $1.6b higher in the March year, compared to the March 2006 year, partly offset by a $900m rise in New Zealand's income earned from investments abroad.
A $2.5b net inflow of capital into this country in the latest quarter financed the current account deficit.
The country's net international investment position showed a net debtor position, where liabilities exceed assets, of $145b at March 31, an increase of $1 billion.
Investment income showed a seasonally adjusted deficit of $2.81b in the March quarter, $345m lower than the December quarter deficit.
The lower deficit was due to a $102m increase in income earned from New Zealand's investments abroad and a $243m decrease in income earned by foreign investors from their investments in this country.
Goldman Sachs JBWere economist Shamubeel Eaqub said the headline figure had improved substantially, from 9 per cent to 8.5 per cent, but the seasonally adjusted measure widened from 8.3 per cent to 8.6 per cent, consistent with a worsening trend.
"The net foreign liability remains extremely large at 89 per cent of GDP, far in excess of what we consider to be sustainable.
"We still need to have NZ dollar correction, sub-trend economic growth and improved savings to resolve this, and none of these things are going to happen quickly at the rate we're going now."
The New Zealand dollar, which has been trading at record post-float highs this month, strengthened to US76.40c from Us76.24c before the announcement.
Deutsche Bank chief economist Darren Gibbs said the main feature was the service sector balance not quite as positive as he had expected.
He said while the annual deficit was moving down, it was going to remain a big deficit for some time.
- NZPA
