New Zealand's investment in Australia up 23 percent

New Zealand's investment in Australia rose to $51.0 billion at 31 March 2011, Statistics New Zealand said today.

"Banks increased lending to their Australian parents, New Zealand investors purchased shares in Australia, and the value of New Zealand-owned companies in Australia increased," balance of payments manager John Morris said.

Balance of payments and international investment position statistics show that, of New Zealand's $164.6 billion investment overseas at 31 March 2011, 57.0 percent was held in Australia, the United States, and the United Kingdom. These three countries were also the source of 67.0 percent of all foreign investment in New Zealand.

A feature of foreign investment in New Zealand was a fall in short-term borrowing from the United States during the year. The banking sector reduced short-term funding, as increased domestic deposits lessened the need for overseas funding.

Australian investors held $106.9 billion of investments in New Zealand at 31 March 2011, up $6.1 billion from 31 March 2010. Australian-owned companies made higher profits during the year and reinvested these earnings in New Zealand.

The New Zealand Government raised money by issuing more debt securities. Australian investors purchased $2.4 billion of these over the year, and now directly hold $3.2 billion of New Zealand Government debt securities. The value of government debt securities held by non-residents increased $10.1 billion during the year.

The increase in debt securities issued is reflected in the public administration industry (the government) holding a higher level of international liabilties. Government liabilities increased $11.2 billion from 31 March 2010, to reach $34.8 billion at 31 March 2011.

New Zealand's total overseas liabilities were $316.6 billion at 31 March 2011. Part of this is held in foreign currencies, which are subject to valuation changes due to exchange rate fluctuations. To manage valuation change effects, 93.1 percent of New Zealand's foreign-currency-denominated external debt at 31 March 2011 was hedged in some way. This level of hedging has remained fairly stable over the last seven years.

At 31 March 2011, 99.1 percent of banking sector debt was hedged in some way, compared with 73.6 percent for other sectors.