Current account back in deficit but net liabilities fall

New Zealand's seasonally adjusted current account balance was a $2.8 billion deficit in the December 2010 quarter, Statistics New Zealand said today. However, New Zealand's net international liabilities were down $1.3 billion to $159.0 billion (81.7 percent of GDP) at 31 December 2010.

The current account moved back into deficit after reinsurance claims of $3.6 billion from the September Canterbury earthquakes had resulted in a $1.7 billion surplus in the September 2010 quarter.

"We have revised our estimate of expected reinsurance claims for the September 2010 quarter from $1.7 billion to $3.6 billion after receiving updated information from the insurance industry," balance of payments manager John Morris said. "All insurance claims resulting from an event such as an earthquake are recorded in the period the event occurs in."

Excluding the overseas reinsurance claims, the December 2010 quarter seasonally adjusted deficit rose $990 million from the September 2010 quarter. The main reason was an increase in income from foreign investment in New Zealand, largely because profits earned by foreign-owned corporates rose.

There was also a smaller surplus on trade in goods and services in the latest quarter. Imports of goods increased, due to several high-value vessels and aircraft being purchased during the quarter. Meanwhile, spending by overseas tourists while in New Zealand fell once again. Their spending was at its lowest level in nine years, with falls in both the number of visitors and their length of stay.

For the December 2010 year, the current account deficit was 2.3 percent of GDP. Without the reinsurance claims resulting from the September earthquakes, the year ended December 2010 current account deficit would be 4.1 percent of GDP.

There was a net $2.8 billion inflow of investment to New Zealand in the December 2010 quarter, which financed the current account deficit.

"A feature of these investment flows was that banks issued less overseas short-term debt as their domestic deposits increased, while foreign investors continued to buy New Zealand government bonds," Mr Morris said.

The net inflow of investment in the latest quarter increased net international liabilities. However, this was more than offset by positive valuation changes to overseas assets and liabilities, as overseas sharemarkets continued to improve and New Zealand's derivative liabilities fell.

For more information, please see the Balance of Payments and International Investment Position: December 2010 quarter information release. For related data, please visit Infoshare.

Geoff Bascand 23 March 2011

Government Statistician