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Increase In Foreign Investment

Balance of Payments: Year ended March 2000

Increase In Foreign Investment

New Zealand received $10.0 billion of foreign investment in the year ended March 2000, $4.2 billion more than in 1999. Foreign investment flows into New Zealand continue to exceed New Zealand's investment abroad. This is despite New Zealand investment abroad in 2000 being the highest since 1994.

The $10.0 billion net inflow to New Zealand of foreign investment in the year ended March 2000 was significantly larger than in the previous three years, and continues to show signs of structural change. The main features of the 2000 result are a shift between the 'portfolio' and 'other investment' categories, an increase in 'other investment' in its own right, and a net inflow of foreign direct investment at a similar level to those recorded for the previous three years. The shift from portfolio to other investment was primarily due to banks replacing liabilities in the form of bills and bonds (classified as portfolio investment) with deposit liabilities (classified as other investment). A net inflow of foreign capital into New Zealand is necessary for financing the current account deficit.

Key features of New Zealanders investment activity was increasing investment abroad via fund managers and increased direct investment into Australia. The $5.5 billion of total net New Zealand investment abroad during the year ended March 2000 was spread across the three major investment types - direct, portfolio and other. New Zealand net direct investment abroad at $1.3 billion in 2000 is lower than in 1999 by $0.7 billion.

At negative $87.1 billion, New Zealand's international investment position as a net debtor country has remained stable since March 1999, and is little changed from the $89.3 billion net debtor position at March 1998. Since the series began in 1989 the size of New Zealand's net debtor position has been generally increasing, with a $9.5 billion increase between March 1997 and 1998.

New Zealand's assets abroad have increased significantly, by $5.4 billion between March 1998 and 1999, and by $8.2 billion between March 1999 and March 2000. While the level of foreign investment in New Zealand continues to rise, the composition of this investment is changing. The level of foreign direct investment remained in the region of $63 - $64 billion at March 1998 to March 2000. However, the level of portfolio investment in New Zealand at March 2000, at $27.7 billion, was below the $28.5 billion level at March 1996. The level of other investment has also risen significantly.


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