Despite the cosmetic surgery of revisions to the historical data, Friday's current account deficit was still an ugly number.
The $7.5 billion gap between what New Zealand earned from exports, tourism and overseas investment over the year to June and what the rest of the world earned from us is around 7.1 per cent of gross domestic product, but its exact magnitude depends on how much the economy shrank in the June quarter - a figure that will be known this week.
Within the OECD, only Poland (7.6 per cent) and Portugal (8.9 per cent) are doing worse.
Should we care?
Yes. The deficit has to be paid for by inflows of capital and credit, adding to a stock of net foreign claims on the economy which is already around 100 per cent of GDP. In other words, it would take all of an entire year's output of the economy to pay it off.
The deficit has to be financed on terms acceptable to foreign investors and lenders. The higher the accumulated debt, the cheaper assets have to get, or the higher interest rates have to go, to attract that money.
There are indications the current account may have just about bottomed out. Seasonally adjusted, it has been improving over the past two quarters, thanks to stronger exports.
And it will improve by 0.6 per cent of GDP in December when the Anzac frigate Te Mana drops out of the annual numbers.
But there are limits to how much the deficit can be expected to improve. Those stronger exports will eventually warm up the domestic economy, spurring demand for imports.
Overall growth is forecast to be considerably stronger next year than this year, boosting the earnings of foreign-owned companies.
And, meanwhile, the weak dollar is increasing the cost of servicing debt denominated in foreign currencies.
While there may not be another frigate steaming over the horizon, the Government does plan to spend about as much on imported armoured personnel carriers and other hardware.
For all these reasons, ANZ Bank economists do not expect the deficit to get much smaller than 6 per cent (in a year) before it starts to deteriorate again.
It is evidence of structural weaknesses in the economy, the solutions for which are easy to list but hard to accomplish - we need to export more and import less, save more and spend less and, above all, invest more shrewdly.
Nothing is wrong with relying on foreigners' savings to finance investment, if the investment is of good quality.
Unfortunately, in the Muldoon era much of the current account deficit was used to finance Government spending. In the 1990s, by contrast, much of the blowout in the deficit went on a rural and residential property boom.
Asset price booms are hardly very productive investments.
All in all, the external deficit is liable to remain a drag on the exchange rate indefinitely.
It may be an argument, though not a very creditable one, for adopting the Australian dollar. To the extent that the deficit is financed by Australians (such as the parents of four of our largest banks) it would cease to be a foreign exchange problem.
And to the extent that it is funded by non-Australians, the selling pressure would be spread over a much larger area.
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