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Current Account Deficit Improves

Embargoed until 10:45am – 20 December 2006

Current Account Deficit Improves

The seasonally adjusted current account deficit was $3,114 million in the September 2006 quarter, Statistics New Zealand said today. This deficit was $418 million lower than the June 2006 quarter deficit, which was mainly due to an improvement in the investment income deficit. There was little change in the seasonally adjusted goods balance, with both exports and imports of goods increasing by similar amounts this quarter.

The $463 million narrowing of the investment income deficit was driven by lower profits earned by foreignowned New Zealand companies, combined with an increase in earnings from New Zealand’s investments abroad. The value of exports of goods rose $242 million from the June 2006 quarter to the September 2006 quarter, with export volumes driving the increase. The major export commodities contributing to the rise in export volumes were forestry products, and food and beverages. Import prices and volumes both contributed to the $240 million increase in the value of goods imports.

The current account deficit for the September 2006 quarter was financed by a $4.4 billion net inflow of capital into New Zealand this quarter. This was the result of $7.8 billion of foreign investment into New Zealand during the quarter exceeding $3.4 billion of New Zealand investment abroad. The New Zealand banking sector was the most significant contributor to these investment transactions.

The year ended September 2006 current account deficit was $14.4 billion (9.1 percent of GDP), compared with the year ended June 2006 deficit of $15.1 billion (9.7 percent of GDP). The lower year-ended deficit was mainly due to a $1.4 billion increase in the value of exports of goods, which was partly offset by a $0.7 billion rise in the value of imports of goods. This is the first time since March 2003 that the year ended deficit has narrowed between quarters.

At 30 September 2006, New Zealand's balance sheet with the rest of the world was in a net liability position of $137.1 billion. Compared with one year earlier, New Zealand's net liabilities to overseas have risen by $9.7 billion. Net overseas debt (lending less borrowing) now forms 88.4 percent of New Zealand's net liabilities to overseas investors, compared with 82.9 percent one year ago.

Brian Pink
Government Statistician


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