Current Account deficit worsens

New Zealand's seasonally adjusted current account deficit narrowed $642 million in the June quarter, from the March quarter, to $3.5 billion, Statistics New Zealand (SNZ) said today.

The actual figure for the three months to June was $3.1b, up from $2.8b the previous quarter.

For June year, the current account deficit was $15.2b, up from $14.9b for the year ended March, and $3.1b wider than for the year ended June 2005, data published today by Statistics New Zealand shows.

The annual deficit equated to 9.7 per cent of GDP, worse than the 9.3 per cent than economists had forecast.

The smaller seasonally adjusted deficit this quarter was due to an increase in the value of goods exported, combined with increased spending by visitors to this country, SNZ said.

Those factors were partly offset by an increase in income earned from foreign investment in New Zealand.

The June quarter investment income deficit rose $133m to $3.2b, driven by a $297m rise in income earned by foreign investors from their investments in this country. That was partly offset by a $164m rise in income earned from New Zealand investments abroad.

The June 2006 quarter showed a $2.3b net inflow of investment to this country, achieved by the return of investment to New Zealand exceeding the withdrawal of foreign investment.

But the effect of that net inflow on New Zealand's net debtor position -- the excess of New Zealand's liabilities over its assets -- was almost entirely offset by revaluation movements.

The overall result of the financial account inflow of capital investment (increasing liabilities) and valuation changes returned a net debtor position of $130.5b at June 30, from $130b at March 31.

Latest estimates of the trend in the current account balance showed a slight reduction in the deficit, SNZ said.

That was caused by a reducing goods and services deficit more than offsetting a continuing widening of the income and current transfers deficit.

The trend in the goods and services balance was showing an improvement following 11 quarters of widening deficits.

The seasonally adjusted value of goods exports increased $680m between the March and June quarters to $8.9b, with merchandise export prices up 8 per cent.

Export volumes were also up in the quarter, with the largest increase being in dairy products and meat, SNZ said.

The value of goods imported rose $243m from the March to the June quarters to $9.5b, although import volumes fell slightly, the first fall since the September 2004 quarter.

- NZPA