Net International Investment Position Remains Steady
New Zealand’s net international liability position was steady at $180 billion at 30 June 2020, Stats NZ said today.
“Global financial markets saw large changes in valuation, while investment portfolios continued to adjust to the volatility COVID-19 has created,” international statistics senior manager Peter Dolan said.
At 30 June 2020, New Zealand’s net international liability position reached 58.4 percent of gross domestic product (GDP), the highest percentage of GDP since the September 2016 quarter. This compares with 57.1 percent of GDP at 31 March 2020 and a peak of 84.2 percent (March 2009 quarter) during the global financial crisis (GFC).
Net international liability position wider than at end of 2019
When compared with the net international liability position at 31 December 2019, before COVID-19 took hold, the net international liability position is $8.9 billion wider.
“Since the start of 2020, market price changes had the largest impact on the net international liability position. Overall, changes in market prices reduced the value of New Zealand assets abroad by $8 billion, and increased the value of New Zealand liabilities to overseas by $5.6 billion,” Mr Dolan said.
The threat of a global pandemic created a flurry of activity in the first half of the year. While there were large reallocations of portfolios from asset types such as equities into cash and deposits in the March 2020 quarter, there were further reallocations returning to a more diversified portfolio in the June 2020 quarter.
There was a net divestment of New Zealand investment abroad of $9.4 billion in the June 2020 quarter. While the largest driver of the inflow came from reducing holdings of currency and deposits (other investment), much of this was reinvested in assets like equities and debt securities (portfolio investment).
The $4.5 billion divestment in reserve assets was a by-product of domestic banks reducing their settlement account balances held with the Reserve Bank of New Zealand (see RBNZ’s Balance Sheet). The higher levels of these settlement account balances were mainly attributed to RBNZ's large-scale asset purchase program, which has injected cash into the New Zealand economy.
Net external debt
New Zealand's net external debt widened $4.3 billion in the quarter to $145.5 billion at 30 June 2020.
New Zealand’s net external debt (borrowings from foreign lenders) is different from its net international liability position as the net external debt records investments in the form of debt instruments and excludes equity (shares) and financial derivatives.
General government net external debt was $18.4 billion at 30 June 2020 compared with $21.4 billion at 30 June 2019.