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Current Account Deficit Falls

Current Account Deficit Falls

The seasonally adjusted Balance of Payments current account deficit fell $446 million in the March 2003 quarter, according to Statistics New Zealand. The deficit represents the difference between New Zealand's total overseas earnings and payments during the quarter. Statistics New Zealand also adjusts earnings from exports and payments for imports for seasonal effects to allow adjacent quarterly figures to be compared. The deficit has been on a declining trend over the last two quarters.

The March quarter current account balance before seasonal adjustment was a surplus of $354 million.

The main causes of the reduction in the seasonally adjusted deficit was a $201 million fall in the seasonally adjusted cost of goods imports, and a $218 million fall in the seasonally adjusted cost of services purchased from abroad. The rising value of the New Zealand dollar over the March quarter resulted in falling New Zealand dollar prices for imported goods and services. Prices for imported goods fell by 4.4 percent. The major effect of falling prices was on imports of mechanical machinery, transport equipment and electrical machinery. Fewer New Zealanders travelling abroad in the March quarter contributed to a $112 million fall in New Zealand tourism expenditure abroad, and was a contributing element in the $92 million fall in March quarter transportation payments. These were the major factors reducing the cost of services imports.

Overall, in the March 2003 quarter New Zealand recorded a seasonally adjusted surplus of $698 million from international trade in goods and services, which was $510 million larger than the December 2002 quarter surplus.

The second component of the Current Account includes receipts and payments from international transfers and from investment income. The deficit balance in this component of the Current Account increased by $64 million, to $1,603 million. This deficit more than offset the goods and services surplus, yielding the overall result of a seasonally adjusted deficit of $905 million. The main factor causing the increased transfers and investment income deficit was a $141 million fall in non-resident withholding tax (NRWT) transfer receipts in the March 2003 quarter compared with the December 2002 quarter, which followed lower dividend payments by New Zealand companies to foreign investors.

The current account deficit for the year ended March 2003 was $4,903 million, compared with the March 2002 year ended deficit of $2,795 million.

Statistics New Zealand has also released the latest statement of New Zealand's financial position with respect to the rest of the world.

At 31 March 2003, New Zealand recorded a net debtor position (New Zealand's international investment liabilities greater than its international investment assets) of $101.6 billion. This gap was $0.5 billion larger than the negative $101.1 billion position at 31 December 2002. The stock of New Zealand investment abroad increased by $1.4 billion and the stock of foreign investment in New Zealand rose by $1.8 billion. These increases arose from flows of New Zealand investment abroad, and flows of foreign investment into New Zealand, coupled with rises in the level of financial derivative assets and liabilities. The increases were partly offset by an appreciating New Zealand dollar and falls in market values, which together reduced the New Zealand dollar value of both New Zealand's international assets and liabilities.

Brian Pink
Government Statistician

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