Car imports tow account balance into the red
The current account deficit has slipped back into the red with a $400 million deficit in the September 2020 quarter, compared with last quarter’s record surplus of $600m, Stats NZ figures show.
But the quarterly deficit — 0.8 per cent of GDP — remains much smaller than for the same period last year (3.7 per cent).
That was still the lowest September deficit since 2001.
On an annual basis, the current account deficit for the September 2020 year narrowed to $2.6b, compared with a deficit of $11.7b in the September 2019 year.
The main contributor to the deficit was the rise in goods imports of $1.1b, following the fall in the June 2020 quarter.
“The rise in goods imports was mainly driven by an increase in car imports,” international statistics senior manager Peter Dolan said.
The Covid-19 pandemic has caused a net improvement in New Zealand’s trade balance as the country has imported less while our major exports have continued at strong volumes and values.
The current account records New Zealand’s transactions with the rest of the world — including its net trade in goods and services, its net earnings on cross-border investments, and its net transfer payments.
The deficit was in line with forecasts, said Westpac senior economist Nathan Penny.
“Goods imports, while up on the June quarter, remained very soft.
“In contrast, goods exports remained resilient, dropping only 2 per cent as global demand for New Zealand food exports continued to hold up,” he said.
“Somewhat surprisingly in light of Covid, the services balance rose. The lifting services balance was helped higher by both higher services exports and lower services imports.”
Services includes tourism and travel as well as business services.
“While travel and transportation services trade have fallen since border restrictions were imposed in March, our other top services have remained steady, now making up a larger proportion of the total,” Dolan said.
Travel and transportation services combined contributed 52 per cent of total services exports and just over a quarter of services imports in the September 2020 quarter.
Other business services (for example, management fees paid by overseas-owned companies) made up 15 per cent of total services exports, now the second-largest contributor as travel and transportation services declined.
The investment income deficit widened slightly compared to last quarter, mostly due to higher profits for overseas-owned firms.
New Zealand’s international assets were $299.1b, $3.3b smaller than at the end of the previous quarter.
International liabilities were $477b, down $5.7b over the same period.
This resulted in a net liability position of $177.9b, $2.4b smaller than at 30 June 2020.
Goods imports, while up on the June quarter, remained very soft. In contrast, goods exports remained resilient. Nathan Penny, Westpac chief economist