Deficit out to $3.73b

By BRIAN FALLOW

The current account deficit widened in the September quarter, driven by a shrinking trade surplus.

The deficit of $3.73 billion in the year ended September is equivalent to 3 per cent of gross domestic product and compares with an annual deficit in June of $2.96 billion, or 2.4 per cent of GDP.

The deterioration of $769 million is explained by a $786 million drop in the goods and services surplus.

Statistics New Zealand said that while export volumes were little changed in the September quarter, export prices fell 2.8 per cent, mainly for dairy products.

Import volumes increased 2.3 per cent, which more than offset a 1 per cent decline in import prices.

The cumulative effect of decades of current account deficits is a mounting pile of foreign claims on the New Zealand economy.

At September 30, foreign investment in New Zealand exceeded New Zealand investment abroad by just under $100 billion.

In the latest quarter, the flow of outbound investment balanced the inflow of $2.8 billion.

But New Zealand's net debtor position worsened because the stock of existing assets overseas lost $1.6 billion in value (mainly overseas shares held by fund managers). Foreign investment in New Zealand held its value.