Higher exports help reduce current account deficit

Rising exports and a fall in the investment income deficit helped reduce New Zealand's seasonally adjusted current account balance by $1.6 billion in the March 2010 quarter, Statistics New Zealand said today. The deficit is now $1.3 billion.

The increase in exports of goods was mainly due to higher prices, especially for dairy products overseas. "This is the first increase in goods exports for over a year," said balance of payments manager John Morris. "Dairy prices moved significantly."

Profits earned by foreign-owned New Zealand companies fell this quarter, exaggerated by a tax transaction that increased banking sector profits in the previous quarter. Excluding this tax transaction, banks' profits remained flat this quarter. New Zealand investors also earned more from their overseas subsidiaries.

Unadjusted for seasonal effects, the current account balance shows a surplus of $0.2 billion, the first March quarter since 2003 that New Zealand has earned more from overseas than it has spent abroad.

The current account deficit for the year ended March 2010 was $4.5 billion (2.4 percent of GDP), down from $14.6 billion (7.9 percent of GDP) a year ago. Imports of goods fell $8.3 billion over this time, while income from foreign investment in New Zealand fell $5.8 billion.

At 31 March 2010, New Zealand's net international debtor position was $166.7 billion (88.9 percent of GDP), compared with $168.3 billion (90.6 percent of GDP) at 31 December 2009. A net international debtor position means that overseas investment in New Zealand is greater than New Zealand investment abroad.

The majority of New Zealand's net international debtor position is made up of debt. At 31 March 2010, New Zealand's short-term overseas debt was 40.4 percent of total overseas debt, the lowest level since the series began in June 2000. This reflects banks working towards the Reserve Bank of New Zealand's revised Prudential Liquidity Policy, which requires banks to hold longer-term foreign funding.

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