Manfed - Comments on Statistics Recently Released
11 October 2000
BULLETIN NO. 8/2000
Brief Comments on Statistics Recently Released
Balance of Payments – June 2000 Quarter
The current account deficit deteriorated by a further $211 million in the June quarter, lifting the annual deficit for the 12 months to June to $7,540 million, 7.2% of GDP.
The deficit has deteriorated significantly over the last 12 months, with an 81% increase from the deficit of $4,165 million in the year to June 1999. While the purchase of the frigate was a component in the deficit, the $7,338 million deficit in investment income flows was the major component in the deficit.
Much of the deterioration in investment income flows was expected because of strong growth in business profits over the last 12 months. In the manufacturing sector, profit levels in the year to June 2000 were 56.4% up on the previous year.
It should be noted that the balance of payments series records all profit made by foreign companies in New Zealand as a debit in the investment account. All profits are recorded as a debit regardless of whether they are reinvested in New Zealand or remitted overseas.
Profit levels in manufacturing over the last year were boosted by strong domestic growth at the end of 1999 and weakness in the currency which has boosted export returns. In this respect the weak currency has had a short term negative impact on the balance of payments.
There were, however, some positive indications from the latest data and the substantial revisions to earlier data.
The data released up to the March quarter had shown a more substantial deterioration in the balance of payments with an annual deficit of $8,542 million recorded in the year to March, 8.2% of GDP. The revised data release last month showed the deficit was $7,329 million (7.1% of GDP), $1,213 million better than previously shown.
New Zealand current account balance
Comparison of revised and previously released data
The data released
up to March had shown a progressive deterioration in the
balance of payments since 1995. While a short term
improvement was expected later this year, the deterioration
in the investment account suggested any significant
improvement in the deficit was unlikely.
The new data released last month suggests the deficit has been much more stable. The deficit reached 7.1% of GDP in June and September 1997 and is currently at 7.2%. While a further deterioration is possible in the September quarter the ratio will improve in the December quarter.
The most significant factor in the improvement in the revised balance of payments deficit was an increase in the income accruing to New Zealanders from investment overseas. This has been driven by increased New Zealand ownership of foreign assets and better income from those assets.
SOURCE: Statistics NZ
International Investment Position – March 2000
New Zealand’s net investment improved marginally in the year ended March 2000, but was still in deficit by $87.1 billion. The net position has been quite stable since 1998 when the deficit reached $89.3 billion.
Over the last 12 months total foreign investment in New Zealand increased by $8.2 billion but this was fully offset by an $8.2 billion increase in New Zealand investment abroad.
Between 1996 and 2000 New Zealand ownership of foreign equity assets has increased by $20 billion to $45 billion. Over the same period foreign ownership of New Zealand equity assets increased by $10 billion to $52 billion.
Over the period from 1996 to 2000 there was still a deterioration in New Zealand’s net investment position due to a $37 billion (69%) increase in borrowing by the commercial sector. Much of this is borrowing by the major trading banks to cover lending for housing.
1996 1998 2000
Years ended 31 March ($ million)
New Zealand's International Assets
Equity Assets 25,492 27,890 45,079
Lending 12,796 11,781 19,045
Reserve Assets 6,748 7,568 7,877
Total International Assets 45,036 47,239 72,001
New Zealand's International Liabilities
Equity Liabilities 41,120 50,993 51,786
Borrowing 74,776 85,568 107,300
Total International Liabilities 115,896 136,562 159,086
Net International Investment Position -70,860 -89,323 -87,084
Over the last two years our current account balance has deteriorated because of a cyclical improvement in business profits in New Zealand. The small improvement in New Zealand’s net international investment position suggests the balance of payments should stabilise in the longer term unless there is further growth in borrowing by the household sector.
Latest balance of payments trends data is already showing a small reduction in the deficit in the investment account. However, a more substantial improvement will depend on a further improvement in New Zealand’s savings level.
SOURCE: Statistics NZ
Labour Cost Index – June 2000 Quarter
Labour costs rose by 1.6% over the 12 months from June 1999. This follows an increase of just 0.5% in the previous year.
Salary and wage costs rose by 1.6% in the 12 months to June 2000 while non wage costs also rose by 1.6%. Factors driving the increase in non wage costs were:
the increase in the fringe benefit tax rate from 49% to 64%.
an increase in the number of statutory holidays (this is influenced by whether Waitangi and ANZAC days fall during the week or at the weekend)
a 22.2% fall in employers workplace accident insurance costs. Statistics NZ notes that about half of the fall was due to a decrease in the residual claims levy while the other half was due to lower premiums under the deregulated market, which ended on 1 July.
The decrease in accident insurance premiums was much greater in the public sector, with a 33.7% fall in insurance costs.
In the manufacturing sector, salary and wage costs rose by 1.3% in the 12 months to June 2000 while overall labour costs rose by 1.1%.
The manufacturing sector pays a higher than average premium for workplace accident insurance so the reforms during the 12 months to June 2000 contributed to the slower growth in non wage costs for the sector.
SOURCE: Statistics NZ
Overseas Trade – August 2000
Total provisional exports increased by 24% in August while manufactured exports (BMS – excludes meat, dairy and fish products, scoured wool and wood pulp) increased by 27%.
Exports of manufactured commodities remain strong, with a 51% increase in exports in August. In the 12 months to August, manufactured commodity exports have increased by $912 million to $3,574 million, 36% up on the previous year.
Much of the growth in manufactured commodity exports has come from the items confidentialised on a 12 month basis (mainly newsprint and methanol) although non-ferrous metal exports have also grown significantly in value.
Growth in exports of elaborately transformed manufactures (ETMs) has weakened slightly with increases of 16% in July and 17% in August. It appears this may be partly due to a slowing in the growth rate in ETM exports to Australia. The 1 July introduction of GST could be a factor in this although the monthly data can be quite volatile due to variations in shipping patterns. Data for the September quarter will provide a clearer picture on whether there has been a GST impact.
Exports to China and Hong Kong have been accelerating in recent months. Combined exports for the year to August were $529 million, an increase of $124 million (30.7%) on the previous year. While most of this growth has come from manufactured commodities, it is also a big market for manufacturers of electrical and electronic equipment ($60.9 million in the last 12 months).
Imports increased by 19% in the month, with fuel imports contributing much of the growth.
Manufactured (BMS) import growth continues to slow, increasing by 12% in the month. There has been a slowing in import growth for consumption goods and vehicles while import growth for industrial supplies and capital equipment remains stronger.
Imports of industrial machinery increased by 18% in the month of August while imports of agricultural machinery were up 28%.
SOURCE: Statistics NZ
Crawford Phone: 04 496 2813 (wk)
Trade and Economic Analyst