Current account surplus swung by $1.7b earthquake claims

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New Zealand's current account balance was a surplus of $35 million in the September quarter, Statistics New Zealand said today.

This is a turnaround from a $1,922 million deficit in the last, June quarter.

The movement from a deficit to a surplus was driven by an estimated $1.7 billion of reinsurance claims arising from the Canterbury earthquakes.

This is an early estimate of the amount New Zealand insurers
expect to claim from their overseas reinsurers, said Statistics NZ.

"Without the $1,700 million reinsurance claims, the current account balance would have been a deficit of $1,665 million," balance of payments manager John Morris said.

ANZ said it did not foresee a return to significantly larger deficits.

"With our external debt already very high and the rating agencies closely watching the NZ situation, a return to larger deficits is likely to have adverse consequences. We expect external deficits in the 2 to 4 per cent range over the next couple of years," ANZ economist Mark Smith said.

Excluding the reinsurance claims, the main driver of the current account balance this quarter was a $581 million smaller investment income deficit.

Profits earned by foreign-owned New Zealand companies fell $551 million, while profits earned by New Zealand-owned subsidiaries abroad increased $48 million.

Exports of goods and services fell in the latest quarter, mainly due to lower volumes of meat exports.

Expenditure by visitors to New Zealand fell to the lowest level since the March 2002 quarter, driven by significantly lower expenditure per person.

Unadjusted, there was a current account deficit of $1.8 billion in the September 2010 quarter. This contributed to the year ended September 2010 deficit of $5.9 billion (3.1 per cent of GDP), compared with the $5.9 billion deficit (3.2 per cent of GDP) for the September 2009 year.

A net inflow of overseas investment is required when the current account is in deficit. The key feature of foreign investment in New Zealand during the quarter was foreign investors buying a net $3.1 billion of New Zealand Government debt securities.

There was also a $2.6 billion outflow of New Zealand investment overseas, which includes the estimated $1.7 billion of accounts receivable arising from the Canterbury earthquakes.

At 30 September 2010, New Zealand's net international liabilities were $162.5 billion (85.2 per cent of GDP), a reduction when compared with $163.1 billion (86.3 per cent of GDP) at 30 June 2010.

- HERALD ONLINE