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Current Account Deficit Narrows

Current Account Deficit Narrows

The Balance of Payments current account deficit narrowed this quarter, recording a seasonally adjusted reduction of $396 million in the December 2003 quarter, according to Statistics New Zealand. The December quarter narrowing of the deficit follows widening deficits in the June and September 2003 quarters. The deficit represents the difference between New Zealand's total overseas earnings and payments during the quarter.

Increased receipts from foreign tourist expenditure in New Zealand, higher receipts from non-resident withholding tax, and increased returns from goods exports were the key factors in the narrower current account deficit. These were partly offset by higher income paid to foreign investors during the quarter.

The number of overseas visitors to New Zealand rose by a seasonally adjusted 6 percent in the December 2003 quarter, compared with the September quarter. The rise in numbers, together with these overseas visitors spending more, drove a $201 million increase in tourism receipts. Higher tax receipts for the New Zealand Government from non-resident withholding tax reflected higher dividend payments to overseas direct and portfolio investors.

In the December 2003 quarter, export prices fell due to an appreciating New Zealand dollar more than offsetting a rise in world commodity prices. However, the impact of increased export volumes, especially dairy products, outweighed the price fall. The overall result was a $128 million (1.8 percent) increase in the value of New Zealand's goods exports in the December 2003 quarter. The value of imports of goods rose $48 million (0.7 percent) in the December quarter, with increased volumes of goods imports being virtually offset by falling New Zealand dollar prices for imports.

The current account balance for the year ended December 2003 was a deficit of $5,936 million, which compares with the December 2002 year ended deficit of $4,663 million. The stock of New Zealand investment abroad at 31 December 2003 was $80.3 billion, a rise of $4.6 billion compared with 30 September 2003. Improved survey coverage of fund managers accounted for approximately $2.3 billion of this rise. When this discontinuity is excluded, the level of New Zealand investment abroad was still higher than at 30 September, due to additional investment abroad of $2.1 billion and a net increase in value due to currency effects and changes in valuations of assets.

Comparing 30 September with 31 December 2003, the stock of foreign investment in New Zealand rose by $3.0 billion, to $181.6 billion. The rise in level is accounted for by a net $1.2 billion inflow of foreign investment into New Zealand during the December 2003 quarter, together with a net $1.8 billion increase in the value of foreign investment due to exchange and valuation changes.

Ian Ewing Acting Government Statistician

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