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Near-record exports see current account deficit shrink

New Zealand's seasonally adjusted current account deficit reduced to $2.7 billion for the June 2018 quarter, Stats NZ said today.

The $484 million decrease from the March 2018 quarter was mainly driven by rising exports of goods and services.

The current account balance records the value of New Zealand’s transactions with the rest of the world in goods, services, and income. A current account deficit exists when we spend more than we earn from our transactions with the rest of the world.

“We had increases in net exports of both goods and services in the latest quarter, but it was the goods exports that drove the reduction in the current account,” international statistics senior manager Peter Dolan said.

New Zealand’s exports of goods increased $711 million from the March 2018 quarter, while services exports increased $284 million. Dairy and meat exports were the driving factor behind the increase in exports

Financial account shows outflow of funds abroad

Conceptually, the current account deficit needs to be balanced by an inflow of funds in the financial account. However, in the June 2018 quarter we reported a net outflow of $1.7 billion to the rest of the world.

The balance of payments is compiled from many sources. This contributes to an imbalance in the balance of payments, which we resolve with a residual item. The residual incorporates any over- or under-coverage, including coverage and timing of data. In the June 2018 quarter the residual was $3.4 billion.

“Due to the timing and often large nature of investment transactions, it is more likely that financial account transactions are the driver of the residual than of the current account,” Mr Dolan said.

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