Quarterly current account deficit widens
26 June 2008
Quarterly current account deficit widens as income from abroad falls
The seasonally adjusted current account deficit increased by $410 million in the March 2008 quarter, to reach $3,527 million, Statistics New Zealand said today. This increase was mainly due to larger deficits on investment income and trade in goods.
The investment income deficit was $3,580 million in the March 2008 quarter, an increase of $315 million. Income from New Zealand investment abroad dropped $346 million this quarter, mainly due to lower earnings by overseas subsidiaries of New Zealand companies. Income from foreign investment in New Zealand also fell this quarter, down $31 million.
The seasonally adjusted balance on goods was a deficit of $158 million in the March 2008 quarter, $139 million larger than the December 2007 quarter deficit. The larger deficit was a result of imports increasing more than exports, taking both exports and imports of goods to their highest recorded values. The rise in the value of goods imports was mainly due to an increase in the value of petroleum and petroleum products. The rise in the value of exports was mainly because of record high prices for dairy products, although the rise in dairy prices was partly offset by a fall in dairy export volumes.
For the year ended March 2008, the current account deficit was $13.8 billion. This is 7.8 percent of GDP, compared with 7.9 percent of GDP for the year ended December 2007 and 8.2 percent of GDP for the year ended March 2007. From the March 2007 year to the March 2008 year, the goods deficit fell by $1.1 billion. This fall was a result of export values increasing by more than import values. However, the investment income deficit increased by $1.3 billion over this time, as income from foreign investments in New Zealand increased more than income from New Zealand investment abroad.
The inflow of foreign funds needed to finance New Zealand's current account deficit has caused net liabilities to the rest of the world to continue to grow. At 31 March 2008, New Zealand's overseas liabilities exceeded its assets abroad by $153.2 billion – an increase of $10.2 billion from 31 March 2007. Rising net overseas debt is the key feature of growth in the net overseas liability position. From 31 March 2007 to 31 March 2008, net overseas debt increased by 11.4 percent.
Dallas Welch (Mrs)
Acting Government Statistician
26 June 2008