Current account better – and yet worse – than expected

Revisions and new data mean the country's current account deficit is not as bad as expected.

There should not be any economic popping of the champagne though: the deficit still rose, from 4.5% of GDP to 4.9% for the year to June.

However, the consensus market forecast was for a rise to 5.2%.

The goods balance improved, with a rise in exports and a fall imports for the June quarter. Imports fell $346 million, while exports fell $171 million, Statistics New Zealand said today.

On an annual basis, however, both fell, although imports slid further, mostly through a drop in crude oil imports.

The services deficit fell to $220 million for the quarter, compared to a $244 million deficit the previous quarter.

Exports of services were flat for the quarter but rose for the year, mostly because of a $213 million rise from "personal cultural and recreation services" – primarily a mix of film making ventures such as the Hobbit, and some of the income from Rugby World Cup related activities.

There is also a rise in international liabilities, mostly because of a rise in foreign investment into New Zealand.

This is partly because of New Zealand's popularity with foreign investors.

Although it often does not feel like it to locals, New Zealand is a safer bet for investors than many other places in the world right now.

This popularity should not be sugar-coated too thickly: much of the $2.7 billion inflow of foreign investment in the three months to June was due to the New Zealand government's need to borrow money.

Official sector borrowing – which not only the central government's bond programme but also the beefed-up local government sector's ability to borrow – increased $1.3 billion in the three months to June.

Borrowing by banks actually decreased, for the third consecutive quarter, suggesting supply is meeting demand in retail bank competition to build their locally sourced, long-term capital bases.

A further factor on the country's financial account is a $2.2 billion upwards revision in reinsurance payments for the Canterbury earthquakes.

Total reinsurance claims are now estimated at $17.9 billion, with only $5.1 billion settled by June 30.

The country's income deficit also rose because of higher profits by offshore investors in New Zealand. The deficit increased $511 million for the quarter, taking the annual figure to $10.1 billion.

Income from New Zealand investments abroad rose $43 million for the quarter and $303 million for the year.