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Current Account Deficit Narrows

Current Account Deficit Narrows

Latest figures show a reduction of $22 million in the current account deficit when seasonal effects are removed, according to Statistics New Zealand. This follows a $448 million decrease in the deficit from the September 2003 quarter to the December 2003 quarter. The underlying trend estimate is showing a narrowing of the deficit in the latest two quarters, and confirms a turning point following two years of widening deficits. The current account deficit represents the difference between New Zealand's total overseas earnings and payments during the quarter.

Increased returns from exports of goods and lower income payments to foreign investors were the main contributors to the decrease in the current account deficit this quarter. These changes were largely offset by: rising imports of goods; a fall in expenditure by foreign tourists in New Zealand; and lower receipts of non-resident withholding tax (reflecting lower dividend payments abroad).

March 2004 quarter export receipts rose, driven by higher volumes, particularly for meat. The rise in goods export volumes was supported by rising world commodity prices, but the appreciation of the New Zealand dollar reduced the New Zealand dollar prices received. The appreciating New Zealand dollar also reduced import prices. This, in turn, partly offset the impact of a rise in import volumes in the March quarter. Overall, the value of goods exported rose $402 million (5.6 percent) and the value of goods imported rose $185 million (2.5 percent).

Revenue from overseas travellers' expenditure in New Zealand fell $149 million in the March 2004 quarter compared with the December 2003 quarter. This fall was driven by a fall in the average amount spent by each visitor, partly due to a fall in the average time each visitor spent in New Zealand, although visitor numbers were up.

Income earned by foreign investors from their investments in New Zealand fell $306 million this quarter. This was primarily the result of a fall in profits reported by New Zealand companies that have significant overseas ownership. Dividends distributed to foreign investors also fell this quarter, and resulted in a fall in receipts of non-resident withholding tax by Inland Revenue. This fall in dividends follows a large increase in dividends paid to foreign investors in the December 2003 quarter.

The current account balance for the year ended March 2004 was a deficit of $5,700 million. This compares with a December 2003 year ended deficit of $5,874 million, and a March 2003 year ended deficit of $4,316 million.

At 31 March 2004, New Zealand's net international debtor position was $107.5 billion (liabilities exceed assets). This position was $1.8 billion (1.7 percent) higher than the position at 31 December 2003. While both international assets and liabilities rose, liabilities rose more than assets did. The main contributors to the rise in New Zealand's international assets were New Zealand fund managers investing in overseas company shares, and New Zealand banks lending abroad. The rise in international liabilities was dominated by New Zealand banks funding their activity by borrowing from abroad.

Brian Pink
Government Statistician

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