The widening of the annual current account deficit was mainly due to a $10b widening of the goods and services deficit and a $2.7b widening of the income deficit.
With earnings from the tourism and education sectors still recovering from Covid, export revenue hasn’t been able to keep up with Kiwis’ appetite for imports.
For the year ended December 31, 2022, imports of goods and services increased $23b (25.8 per cent) to $112.2b.
While the number is ugly it is expected to be nearing its peak as a slowing domestic economy cools demand for imports and exports continue to rebound in the coming year.
The increase in goods imports was driven by machinery, petrol and motor vehicles. The increase in service imports was driven by transportation services, business services and travel services.
“Since New Zealand’s borders opened more New Zealanders have been travelling overseas. The spending on both air transport and travel contributed to the rise in services imports for the year to December 2022,” institutional sectors senior manager Paul Pascoe said.
For the year ended December 31, 2022, exports of goods and services increased $13.1b (16.8 per cent) to $90.7b. Dairy and meat products contributed to the increase in goods exports, while the increase in services exports was driven by travel services – the spending of overseas visitors in New Zealand.
For the December 2022 quarter, the seasonally adjusted current account balance was an $8.5b deficit, $1.4b wider than the September 2022 quarter deficit.
The widening of the seasonally adjusted current account deficit was mainly the result of a $1.3b widening of the goods deficit, a $429 million narrowing of the services deficit, a $556m widening of the primary income deficit and an offset of the $65m change in the secondary income balance, to a surplus.
The primary income balance is mainly made up of what New Zealanders earn from overseas investments, less what overseas investors earn from their New Zealand investments.
“In the December 2022 year, we earned less from overseas investments than overseas investors earned from their New Zealand investments. This resulted in a primary income deficit,” Pascoe said.
The large deficit “wasn’t welcome news”, said ANZ senior economist Miles Workman
The bottom line was that the current account provided an indication of whether or not an economy is living within its means, and the deficit suggested it hasn’t, he said.
“However, reopened borders and monetary tightening (which will weigh on domestic demand and therefore imports) mean the deficit should narrow over time, and that’s something sovereign credit rating agencies should be keeping in mind as they assess NZ’s external sector sustainability.”
Financial markets were unmoved by the data release.
