New Zealand posted its widest annual current account deficit in nine years in the June quarter as foreign-owned firms reaped bigger income from their domestic operations than Kiwi companies did overseas.
The annual deficit widened to $9.5 billion, or 3.3 per cent of gross domestic product, versus an annual deficit of $7.1b, or 2.6 per cent of GDP, in the prior year, Statistics New Zealand said. Economists had tipped an annual deficit of 2.9 per cent of GDP in a Bloomberg poll.
The wider-than-expected deficit was largely due to a $2.1b increase in the primary income deficit, Stats NZ said.
Primary income flows between New Zealand and the rest of the world represent income earned from investments and compensation of employees.
Over the past decade, New Zealand's KiwiSaver and NZ Superannuation investment portfolios have helped increase domestic income earned overseas.
In 2009, the current account deficit dropped from a record peak of 7.8 per cent of GDP to 2.2 per cent and has hovered between 2 per cent and 4 per cent since.
According to Stats NZ, while the dollar value of the current account deficit has increased to a similar level as during the global financial crisis, the economy has grown even more and as a result "our net spend with the rest of the world has shrunk relative to the size of the New Zealand economy."
On a quarterly basis, the unadjusted deficit was $1.6b in the three months to June 30 versus a revised first-quarter surplus of $88 million, Stats NZ said. Economists predicted a second-quarter current account deficit of $1.32b.
In seasonally adjusted terms, however, the current account deficit was $2.7b in the June quarter, $484m narrower than it was in March. The smaller deficit was driven by rising exports of goods and services.
"We had increases in net exports of both goods and services in the latest quarter, but it was the goods exports that drove the reduction in the current account," said international statistics senior manager Peter Dolan.
New Zealand's exports of goods increased $711m from the March quarter, while the services exports increased $284m. Dairy and meat exports were the main factor behind the increase.
The services surplus was a seasonally adjusted $1.5b in the June quarter, up $146m from the March quarter as spending by overseas visitors continued to lift in the current tourism boom.
New Zealand's net international liability position was $157.9b, versus $156.2b at the end of March, with both equating to 54.6 per cent of GDP.
"If the rest of the world call in all the debt New Zealand owes overseas today, it would equate to over half of all expenditure in New Zealand in one year," said Dolan. However, in June 2009, it was 82.6 per cent of GDP.
The value of New Zealand's international assets was $264b as of June 30 versus $252b in the three months to the end of March. The lift was driven by valuation changes and an increase in the value of investments abroad.