Balance of payments widens the most in three years

The goods balance has deteriorated while services and investment income remain steady.
Goods exports picked up after a particularly weak March quarter

The annual current account deficit widened in the June quarter to 3.3% of GDP, or $9.5 billion, from a revised 3.0% of GDP ($8.5b) – the widest in three years. The deficit was previously reported at 2.8% of GDP, Stats NZ says.

“We expect further deterioration to 4% of GDP due to a fading terms of trade and as domestic supply constraints and somewhat weaker demand hold back dairy exports,” JP Morgan economist Ben Jarman says.

In seasonally adjusted terms, the deficit narrowed to $2.7b, an improvement on the $3.15b deficit in the March quarter.

Goods exports picked up after a particularly weak March quarter, while goods imports saw a smaller increase.

The actual quarterly deficit was also wider than expected at $1.6b against an $88 million surplus.

The goods balance, which tends to improve in the June quarter, deteriorated fairly significantly on a year-ago basis to a surplus of $192m compared with $1.0b a year earlier.

This reflects a sharp deterioration in dairy revenues, which fell 1.4% on an annual basis, and the accumulated effects of rising fuel import prices.

Services trade was relatively more stable and was close to unchanged on a year-ago basis thanks to continued strength in tourism.

The weaker goods trade outcome pushed the annual trade surplus down to 0.5% of GDP, the lowest level in five years.

Income balance
The income balance was relatively steady at a deficit of 3.9% of GDP. 
Due to revisions, the investment income deficit over the past year is now significantly larger than previously reported, The revisions are based on annual tax returns and their impact each year is unpredictable.

The net liability position, which reflects how much New Zealand owes to the rest of the world, was $157.9b, or 54.6% of GDP, at June 30.

“While still considered high, this quarter’s position is significantly lower than our record level in 2009. It’s regularly been reaching record lows in recent quarters,” Stats NZ international statistics senior manager Peter Dolan says.

In total, New Zealanders had $146b of portfolio investments overseas at June 30 while overseas investors had $207b.