New Zealand's seasonally adjusted current account deficit grew to $1.8 billion in the June 2010 quarter, mainly caused by a rise in income deficit and lower taxes received from foreign investors, Statistics New Zealand (SNZ) says.
The figures released today show the deficit is $600 million larger compared to theprevious quarter as foreign-owned New Zealand companies earned higher profits, driving the rise in the income deficit.
SNZ also said foreign investors earned more from their other shareholdings and lending in New Zealand.
Taxes received from foreign investors fell after a policy change on non-resident withholding tax introduced by Inland Revenue in February 2010.
ANZ economist Khoon Goh said while New Zealand ran a large trade balance in the second quarter, driven by strong prices received for our major export commodities, , higher profits earned by foreign companies operating here led to an overall deterioration in the current account.
"We have seen a peak in the current account deficit," said Goh. "As the profit cycle improves in line with a gradually improving economy, and import demand eventually picks up, we see the current account deficit gradually widening further from here."
Goh said there were no monetary policy implications from today's release.
SNZ said another factor increase New Zealand's deficit was a fall in visitor spending - visitor numbers were down, along with spending per person.
Rising prices for New Zealand goods overseas increased exports, driving goods surplus to $1.2b - the largest since the series began in 1987 - reflecting the continuing impact of rising prices for dairy exports.
The current account deficit for the year ended June 2010 was $5.6b, or 3 per cent of the GDP, down from $10.5b, or 5.7 per cent of GDP a year ago. Imports of goods fell $5.5b over this time.
Net international liabilities at 30 June were $163.7b, 86.5 per cent of GDP, $2.7b larger than at 31 March 2010. The increase was caused by net foreign investment inflows of $1.3b and falls in overseas sharemarkets.
