Current account gap narrows as trade balance shrinks

Photo / Supplied
Photo / Supplied

New Zealand's annual current account deficit narrowed as expected in the third quarter, driven by a decline in the trade surplus and as overseas investors earned less from their local investments.

The current account gap was $9.89 billion in the year ended September 30, from a deficit of $10.09 billion three months earlier, according to Statistics New Zealand. An annual gap of $9.83 billion was expected, according to a Reuters survey. The annual deficit narrowed to 4.7 per cent of gross domestic product from 4.9 per cent.

The kiwi dollar traded recently at 84.13 cents, little changed from immediately before the report, when it was at 84.17 cents. While a large current account deficit in theory worries financial markets because it shows a country is spending more than it earns, in reality New Zealand hasn't been marked down by ratings agencies as a result.

The actual deficit rose to $4.42 billion in the latest quarter from $1.8 billion in the second quarter, in line with forecasts.

In seasonally adjusted terms, the gap narrowed to $2.5 billion from $2.8 billion as the trade balance fell to $220 million from $341 million in the second quarter. Imports outpaced exports, led by oil imports, while the gain in exports was driven by shipments of dairy products. In the year, the balance on goods was a surplus of $1.7 billion, down from $3.1 billion in the year ended Sept. 30, 2011.

The services deficit widened to $303 million in the latest quarter from a gap of $216 million three months earlier, mainly due to imports of insurance and computer services. Insurance premiums have been rising in the wake of the Canterbury earthquakes and other global disasters.

The income deficit fell to $2.26 billion in the third quarter from $2.8 billion in the second quarter, mainly as a result in reduced profits of foreign-owned companies. The income deficit in the year fell to $10.4 billion from $10.7 billion a year earlier.

- BusinessDesk

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_a3 at 17 Apr 2014 18:00:11 Processing Time: 575ms