Year ended current account deficit falls

New Zealand's current account deficit was $5.7 billion (3.1 percent of GDP) for the year ended September 2009 and the smallest as a percentage of GDP since March 2002, Statistics New Zealand said today. The deficit has fallen from 8.4 percent a year ago, when the current account deficit was $15.4 billion.

Contributing to the smaller deficit in the latest year was the first quarterly seasonally adjusted current account surplus since the December 1988 quarter. The September 2009 quarter surplus was $340 million, compared with a deficit of $4.0 billion for the September 2008 quarter, driven by falls in the investment income deficit and imports of goods. A surplus in the current account means that New Zealand's earnings abroad are greater than its expenditures.

The same factors drove the $9.7 billion decrease in the deficit when comparing the year ended September 2008 with the year ended September 2009. "This is what we would expect given the economic climate over this time," Government and International Accounts manager John Morris said. "Company profits are falling, and people are spending less on imports."

The investment income deficit fell $5.8 billion in the year to September 2009. Foreign-owned companies earned lower profits in New Zealand and interest paid on overseas debt also fell, the latter reflecting the fall in market interest rates over this time.

More than $2.0 billion in company tax transactions influenced the fall in income from foreign investment in New Zealand during the year ended September 2009. However, the overall picture remains the same when these effects are removed – the investment income deficit would have fallen $3.7 billion between the years ended September 2008 and September 2009. Additionally, the current account deficit for the September 2009 year would be $7.8 billion, or 4.2 percent of GDP, excluding the tax transactions.

Imports of goods fell $4.9 billion between the September 2008 and September 2009 years, driving the shift in the goods balance from a deficit to a surplus. Import prices for petroleum and petroleum products fell after peaking in the September 2008 quarter. The value of goods exports remained relatively stable over the same time.

The decrease in the year ended current account deficit between the September 2008 and September 2009 years means that New Zealand requires less overseas funding to finance the deficit. This is reflected in the financial account flows between the two periods, with $10.9 billion smaller net inflows of financial capital in the September 2009 year than in the September 2008 year. For more information, please see the Hot Off the Press. For related data, please visit Infoshare.