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Goods exports reduce current account deficit

27 March 2008

Goods exports reduce current account deficit

The seasonally adjusted current account deficit decreased by $489 million in the December 2007 quarter, down to $3,094 million, Statistics New Zealand said today. The smaller deficit was due to a record quarterly increase in exports of goods. This was partly offset by a rise in imports of goods and lower balances on travel services and investment income.

The seasonally adjusted goods surplus balance of $85 million was up from the $732 million deficit last quarter. This was the first goods surplus since the March 2003 quarter. Seasonally adjusted exports of goods increased by $1,782 million (20.2 percent) from the September 2007 quarter.

This was mostly due to increased exports of dairy and petroleum products, coinciding with the first full quarter of production from the Tui oilfield. Seasonally adjusted imports of goods were up this quarter by $966 million (10.1 percent). An increase in the value of petroleum imports was the main contributor. The seasonally adjusted surplus balance on travel dropped by 10.6 percent in the December 2007 quarter.

There were fewer overseas visitors to New Zealand this quarter, resulting in lower earnings from overseas tourism. Meanwhile, the number of New Zealanders holidaying overseas increased. This quarter includes travel related to the Rugby World Cup, which concluded in October. The larger investment income deficit was fuelled by increased interest on overseas debt and dividends payable to overseas investors.


The current account deficit for the year ended December 2007 was $13,834 million (7.9 percent of GDP). This compares with a deficit of $14,003 million (8.6 percent of GDP) for the year ended December 2006. The current account deficit represents the amount by which the economy's demand for resources exceeds its domestic supply. In the December 2007 quarter, the deficit was financed by a net inflow of capital of $3,312 million, as foreign investment in New Zealand of $4,274 million exceeded New Zealand investment abroad of $962 million.

A significant feature of this financing was an increase in overseas debt which is due to be repaid in less than 12 months. Financing the current account deficit leads to changes in New Zealand's balance sheet with the rest of the world.

This balance sheet shows that at 31 December 2007, New Zealand's foreign liabilities exceeded its overseas assets by $152.4 billion. This net debtor position was $9.8 billion larger than one year ago. Geoff Bascand

Government Statistician

27 March 2008

ENDS


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