NZ current account deficit narrows as tourism bolsters services inflow

The current account deficit narrowed in the fourth quarter, partly bolstered by a larger services balance surplus as tourism continues to boom.

The deficit was $2.3 billion in the three months to December 31 against a revised third-quarter deficit of $5 billion, Statistics NZ said. The annual deficit was $7.1 billion, or 2.7% of gross domestic product for the year ended December 2016 versus a deficit of $8.3 billion or 3.4% of GDP in the prior year.

The biggest quarterly movement was in the services balance, which was a surplus of $1.1 billion against a revised deficit of $73 million in the prior quarter. Exports were $5.4 billion against $4.5 billion in the September quarter.

"The number of tourists to New Zealand increased in the December quarter, as did the average amount each tourist spent," international statistics senior manager Daria Kwon said.

The deficit in the goods balance narrowed to $1.5 billion in the fourth quarter against a revised $2.6 billion deficit in the third quarter as goods exports rose to $12.2 billion versus $10.8 billion in the previous quarter while imports were $13.7 billion versus $13.4 billion in three months to September.

The financial account balance, however, was a deficit of $3.3 billion versus a revised surplus of $5.7 billion in the prior quarter.

Statistics NZ noted that to finance a deficit, the nation normally borrows funds from overseas. However, in the latest quarter there was a net outflow of investment as banks increased their investment assets held overseas – currency and deposits – and financed it with additional funds sources from within New Zealand, rather than by raising funds from overseas, the statistics agency said.

The balance on the capital account was a $683 million surplus in the December quarter against a deficit of $11 million in the previous quarter. The surplus was due to a provisional $694 million of reinsurance claims from the November 14 Kaikoura earthquakes, Statistics NZ said.

New Zealand's net international liability position was $156.5 billion or 59.9% of GDP as at December 31, from a revised $166.1 billion or 64.8% of GDP at September 30. This is the lowest international liability position to GDP ratio recorded, the statistics agency said.

The net external debt position – excluding financial derivatives and equity – was $143.5 billion or 55% of GDP at December 31, down from $149.1 billion or 58.2% of GDP on September 30.

"Our external debt position narrowed because our external lending increased by $6.3 billion while our external debt increased by only $649 million," Statistics NZ said.

(BusinessDesk)