Wider annual current account deficit meets expectations

The annual deficit was $10.6 billion, or 3.6 per cent of gross domestic product in the three months ended March 31. Photo / 123RF

New Zealand's annual current account deficit widened in the March quarter, as the goods and services balance swung to a deficit as expected.

The annual deficit was $10.6 billion, or 3.6 per cent of gross domestic product in the three months ended March 31, versus an annual deficit of $8.5b, or 3 per cent of GDP, in the same period a year earlier, Stats NZ said. Economists had forecast an annual deficit of 3.5 per cent of GDP in a Bloomberg poll.

The dollar recently traded at 65.29 US cents versus 65.27 cents before the announcement.

Annual imported goods and services rose at a faster pace than exports, which increased the size of the goods deficit and shrank the services surplus, while the nation's balance of investment income remained in favour of foreign investors.

"New Zealand's current account deficit has remained fairly stable over the past four quarters, compared with the volatility seen during the last decade," international statistics senior manager Peter Dolan said in a statement.

In 2009, the current account deficit dropped from a record peak of 7.8 per cent of GDP to 2.2 per cent. It has hovered between 2 per cent and 4 per cent since.

In the March year, the goods and services balance was a deficit of $104 million versus a surplus of $2.5b in the 2018 March year.

Of that, the goods balance was a deficit of $4.6b versus a deficit of $2.7b in the same period a year earlier, while the services balance was a surplus of $4.5b versus a surplus of $5.2b.

The primary and secondary income balance was a deficit of $10.5b versus a deficit of $11.1b in the prior period.

The primary income component compares domestic and foreign earnings on investments, and the secondary income component covers international transfers such as non-resident withholding tax.

New Zealand's net international liabilities, meanwhile, narrowed to $164.4b, or 55.5 per cent of GDP, at the end of March from $168.4b, or 57.4 per cent of GDP, at the end of December. The net international liability represents how much the country's overseas liabilities exceed its overseas assets.

Stats NZ said the narrowing was mainly due to valuation changes from net financial derivatives and other valuation changes.

The value of New Zealand's international assets was $269.2b as of March 31, versus $259.2b at the end of December. Total international financial liabilities were $433.6b versus $427.6b in the prior quarter.

"In the latest quarter, there was a strong rebound in global share markets which saw increases in both the value of our assets and our liabilities," Dolan said.

On a quarterly basis, the unadjusted current account was in surplus at $675m, versus a surplus of $88m in the March quarter last year. Economists had expected a quarterly surplus of $160m.

The goods balance was a $227 million surplus versus a deficit of $385m deficit in the year-earlier quarter. The services balance showed a surplus of $3b versus a $3.2b surplus in March 2018.

In seasonally adjusted terms, however, the current account deficit was $2.61 billion in the March quarter versus $2.67b in the December quarter.

Seasonally adjusted goods imports were down $76m and exports were up $17m from the December quarter, leading to a goods deficit of $1.1b versus $1.15b in the December quarter.

The seasonally adjusted services surplus narrowed to $970m from $1.09b, with imports rising $85m and exports falling $36m. The fall in exports was led by a decrease in spending by visitors to New Zealand.