Shrinking exports and rising imports widened the current account deficit in the March quarter, pushing the full-year gap between what the country spends and what it earns from international trade and investment to its widest for nearly three years.
The quarter's seasonally adjusted deficit was $2.8 billion, $600 million larger than in the December 2011 quarter.
For the year ended March the deficit widened to $9.7 billion, equivalent to 4.8 per cent of gross domestic product.
That is up from 4.2 per cent in December and the biggest it has been since June 2009 both in dollar terms and relative to the size of the economy.
Bank of New Zealand head of research Stephen Toplis said the Achilles heel of the New Zealand economy's prospective growth story had always been the impact that growth might have on our already poor external accounts position.
"Our forecasts see the deficit climbing to 7 per cent of GDP by year's end and then further still to a peak at 8.3 per cent by the end of 2013," Toplis said.
"Not only is this a direct threat to the New Zealand dollar, it is also a very clear risk for New Zealand's credit rating, with Standard & Poor's in particular having recently placed great emphasis on the current account's progress."
ANZ economist Mark Smith said that over the past few years a positive goods balance had tended to counteract the large invisibles deficit.
"But the camouflage appears to be wearing thin, given the terms of trade are now past their peaks, the higher import intensity of [recovering] investment and the limited margin to boost primary production in the short term."
The goods balance was still in the black in the March quarter, by $117 million, but that was down $900 million from the previous quarter and the smallest surplus since December 2008.
Exports fell $500 million, driven by lower prices for dairy products and fruit, and lower volumes of oil exports.
On the import side almost all the $400 million increase was due to oil and petroleum products, Statistics New Zealand said.
The services deficit widened to $332 million, after Rugby World Cup visitors went home and the high dollar encouraged more New Zealanders to holiday abroad.
By contrast the investment income deficit fell, to $2.4 billion from $2.9 billion in the December quarter, as the profits earned by foreign investors, mainly the banks, declined by $452 million.
Despite the wider deficit, the net international investment position (NIIP) - the stock of foreign claims on the economy, net of New Zealand investment abroad - declined to $143.2 billion from $146.3 billion at the end of 2011.
Half the improvement reflected a higher exchange rate, Statistics New Zealand said, and most of the rest was due to improved prices in overseas sharemarkets during the March quarter.
The NIIP is equivalent to 70.9 per cent of GDP.
But the figure is flattered by $11.9 billion of earthquake-related reinsurance claims which have yet to be paid out and which the statisticians treat as foreign assets until they are.
Excluding them, the NIIP would be $155 billion or 79.4 per cent of GDP, the worst for two years. Challenged about this by Labour's finance spokesman, David Parker, in Parliament yesterday, Finance Minister Bill English said the net international investment position was high by world standards but was a longstanding vulnerability for New Zealand.
The Treasury forecast it would reach 80.8 per cent of GDP by March 2016, a $204 billion liability, he said.
The primary driver of the high external debt had been high levels of household debt - "New Zealanders paying high prices for houses and borrowing most of the money offshore".
The problem had built up over 15 years, said English, and would take quite a lengthy period of New Zealand earning more than it spent to reduce that liability.