Primary exports, tourism narrow 4th quarter deficit

New Zealand’s current account deficit narrowed in the fourth quarter as goods and services exports were fuelled by a recovery in primary exports and spending by tourists.

The deficit was $2.77 billion in the three months ended December 31 versus a revised third-quarter deficit of $4.83b, Statistics New Zealand said.

Economists polled by Bloomberg predicted a fourth-quarter current account deficit of $2.5b.

Stats NZ said the annual deficit was $7.72b, or 2.7 per cent of gross domestic product versus an annual deficit of $5.99b, or 2.2 per cent of GDP, in the prior year, and against economists’ expectations for an annual deficit of 2.6 per cent of GDP.

The wider annual deficit was due to a net outflow of primary, or investment, income and secondary income — which includes international transfers such as non-resident withholding tax — partly offset by a higher surplus from international trade of goods and services.

The biggest quarterly movement was in the services balance, which expanded to a surplus of $1.07 million versus a revised deficit of $48m in the prior quarter as service exports rose to a record $5.8b on increased spending from overseas visitors from $4.8b in the third quarter and service imports slipped to $4.7b from $4.9b in the prior quarter. The goods balance was bolstered by increased exports driven by dairy products and logs outpacing a rise in imports of transport equipment machinery and oil, narrowing the deficit to $1.2b in the fourth quarter from a deficit of $2.1b in the prior quarter.

Exports rose to $14.7b from $12.1b in the prior quarter, while imports advanced to $15.9b from $14.3b three months earlier.

The financial account balance, which shows net investment flows, was a surplus of $1.5b in the three months to December 31 versus a revised surplus of $2.1b in the prior quarter, due largely to the Treasury withdrawing reserve assets to repay maturing debt. The balance on the capital account was a $19m deficit in the December quarter versus a revised $14m deficit in the prior quarter.

Foreign investment in New Zealand showed a deficit of $43m in the December quarter versus a revised surplus of $180m in the three months to September 30.

New Zealand’s net international liability position was $155.2b or 54.8 per cent of GDP as at December 31 from a revised $156.2b or 56 per cent of GDP at September 30.

— BusinessDesk