Current account: New Zealand’s spending deficit with the world widens by $269m

Containers at the Port of Tauranga - New Zealand is still spending more on imports than what it earns on exports. Picture supplied

New Zealand’s seasonally adjusted current account deficit widened by $269 million to $7.2 billion in the June 2024 quarter, Stats NZ said today.

That has kept the deficit stable as a percentage of GDP, although economists had been hoping it would continue to decline from the high levels it hit during the pandemic.

“All up, with no improvement in the annual current account deficit, New Zealand could be facing a long path back towards sustainable levels,” said ANZ economist Henry Russell.

“Today’s data do not appear to be a game-changer for the outlook. We remain of the view that the narrowing in the deficit will be gradual, leaving us vulnerable to shocks and under the watchful eye of Sovereign credit rating agencies for some time yet.”

The increase in the nominal deficit was caused by import spending outpacing export earnings and by a large increase in earnings by overseas investors in New Zealand.

Stats NZ noted the primary income deficit widened by $291 million to $3.8 billion during the quarter.

The overseas earnings of New Zealand investors increased by $36 million, while the earnings of overseas investors in New Zealand increased by $263 million.

“In the June 2024 quarter, New Zealand continued to issue bonds to overseas investors, which further added to the amount of interest paid on all issued bonds,” senior manager Stuart Jones said.

The overseas earnings of New Zealand investors were largely profits from overseas-owned companies.

Meanwhile, the seasonally adjusted goods deficit widened by $110 million to $2.6 billion.

Goods imports increased by $183 million, led by transport equipment, including aircraft and aircraft parts.

Goods exports increased by $74 million, led by meat and a range of other commodities, including aluminium, wine, and fish. Exports of logs, wood products and dairy decreased.

One bright spot was the services deficit narrowed by $28 million to $501 million.

Services exports increased $127 million, led by transportation services exports. Services imports increased $99 million, led by travel imports – the spending of New Zealanders while travelling overseas.

On June 30, 2024, New Zealand’s net international investment liability position was $205.3 billion (49.7% of GDP), $6.2 billion wider than $199.1 billion (48.6% of GDP) as of 31 March 2024.

New Zealand has a net liability position as it has more liabilities with the rest of the world than assets.

The net international investment position represents the difference between New Zealand’s financial assets and liabilities with the rest of the world.

New Zealand investment abroad recorded a $4.1 billion net investment outflow in the June 2024 quarter, as New Zealanders increased assets held with the rest of the world.

Foreign investment in New Zealand recorded a net inflow of $7.9 billion in the June 2024 quarter, as New Zealand increased its liabilities with the rest of the world.

The net investment inflow was driven by:

• $8.5 billion in portfolio investment
• $2.3 billion in direct investment.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up for his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here.