Goods and services drive current account deficit up
New Zealand's current account deficit was $2.8 billion in the March 2012 quarter, Statistics New Zealand said today. This is $0.6 billion larger than the December 2011 quarter deficit.
For the March 2012 year, New Zealand's current account deficit was $9.7 billion (4.8 percent of GDP). This compares with a deficit of $7.2 billion (3.7 percent of GDP) for the March 2011 year.
The quarterly deficit increase to $2.8 billion was mainly caused by a turnaround in New Zealand's international trade in goods and services, which was a deficit for the first time since the December 2008 quarter. Dairy products, crude oil, and fruit drove goods exports down, while imports of crude oil increased.
"The value of dairy exports fell despite an increase in volumes, as dairy prices fell for the third quarter in a row," balance of payments manager John Morris said.
Spending by visitors to New Zealand also fell in the March 2012 quarter, as visitor numbers dropped following the Rugby World Cup. Expenditure by British and other European travellers continued to fall.
Profits earned by foreign-owned companies in New Zealand fell in the March 2012 quarter, partly offsetting the falls in exports of goods and services. Despite the fall in profits, earnings reinvested in New Zealand by these companies increased $0.4 billion this quarter. In contrast, dividends paid to overseas investors by these companies fell $0.8 billion, to their lowest level in over seven years.
The year-end deficit increase to $9.7 billion was mainly due to higher profits earned by foreign-owned banks and increased imports of petroleum and petroleum products. Services imports and transfer payments to overseas also increased over this time, due to the rising costs of reinsurance in the latest year.
"Reinsurance premiums rose following the Canterbury earthquakes, resulting in a $0.4 billion increase in insurance payments during the year," Mr Morris said.
Despite the current account deficit in the March 2012 quarter, New Zealand's net international liability position decreased to $143.2 billion (70.9 percent of GDP) at 31 March 2012, from $146.3 billion (72.9 percent of GDP) at 31 December 2011.
The fall in net international liabilities was due to changes in the value of New Zealand's overseas assets and liabilities. Overseas investment transactions had little impact. An appreciating exchange rate decreased the value of New Zealand's overseas liabilities, and rising overseas share prices increased the value of New Zealand's overseas assets during the quarter.
See also:
Balance of Payments and International Investment Position: March 2012 quarter – Information release