Annual current account deficit widens to $10.5 billion

New Zealand’s annual current account deficit for the year ended September 2018 reached $10.5 billion, Stats NZ said today.

Although this is the largest annual current account deficit since 2009, as a percentage of GDP it was 3.6 percent, lower than the 7.8 percent peak recorded during the global financial crisis.

During the year New Zealand exported $82 billion worth of goods and services.

“Dairy, meat, logs, and spending by overseas visitors in New Zealand drove increases in our exports,” international statistics senior manager Peter Dolan said.

We imported $81 billion of goods and services during the year – mainly vehicles, machinery, petroleum, and also New Zealanders’ spending while travelling overseas.

Goods and services trade by country: Year ended September 2018 has more details. Totals are different between the two releases due to conceptual adjustments of goods data.

Overall our goods and services trade surplus was $0.5 billion for the latest year, meaning we earned slightly more from our exports than we spent on our imports. The $2.2 billion fall in the goods and services surplus between 2017 and 2018 was the largest contributor to the wider current account deficit for the September 2018 year.

The income component of the current account also contributed to this wider deficit.

“The income that foreign investors earned in New Zealand increased more than the income New Zealand investors made abroad,” Mr Dolan said.

"Income from foreign-owned New Zealand companies was up $1.6 billion from the September 2017 year, to $19.3 billion. Despite large bank profits, it was non-financial companies leading the increase, not the banks."

Text alternative for Current account composition, year ended September 2001–18

Financial account records net inflow of investment

The current account deficit means we have a net spend with the rest of the world. To fund the net spend we need a net inflow for investment from the rest of the world.

In the September 2018 year New Zealand-owned overseas assets decreased, meaning there was an inflow of $3.4 billion. We also had a $1.4 billion outflow of funds foreign entities had invested in New Zealand. Overall, we had a $2.1 billion net inflow of investment in the latest year. This partly funded the current account deficit.

The residual

Because the net spend in the current account is not fully funded by a net inflow of funds in the financial account, we have an imbalance in the balance of payments.

The balance of payments is compiled from many sources, which contributes to the imbalance. In the September 2018 year the residual was $8.4 billion.

"The residual can be partly attributed to timing and under-coverage in the balance of payments. We are currently investigating ways to improve our measures," Mr Dolan said.

Quarterly current account summary

In the September 2018 quarter, New Zealand’s seasonally adjusted current account deficit narrowed to $2.6 billion, $102 million smaller than the June 2018 quarter deficit ($2.7 billion).

In the September 2018 quarter:
• The seasonally adjusted goods deficit narrowed to $997 million (down $343 million).
• The seasonally adjusted services surplus narrowed to $1.1 billion (down $344 million).
• The primary income deficit narrowed to $2.6 billion (down $65 million).
• The financial account recorded a net outflow of $303 million.

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