New Zealand Has NZ$2.6 Billion Current Account Deficit

(RTTNews) - New Zealand posted a seasonally adjusted current account deficit of NZ$2.6 billion in the fourth quarter of 2014, Statistics New Zealand said on Wednesday.

That beat forecasts for a shortfall of NZ$2.87 billion, although it slipped from the NZ$2.4 billion deficit in the third quarter.

The larger deficit is due to overseas companies earning more from their investments in New Zealand, the bureau said. Companies tend to earn higher profits when the economy is growing. If nothing else changes, an increase in profits earned by foreign-owned companies in New Zealand will increase our current account deficit.

"Most of this quarter's increase in profits earned by foreign-owned companies in New Zealand was reinvested back into the company," international statistics manager Jason Attewell said. "In addition, companies were able to pay more dividends to their overseas portfolio shareholders this quarter, reflecting recent growth in the New Zealand economy."

This resulted in an increased income deficit, which was partly offset by increased spending by overseas visitors to New Zealand during the quarter. The number of overseas visitors to New Zealand was up 5.4 percent on quarter, and their expenditure jumped 14.1 percent to NZ$2,828 million.

On a yearly basis, the current account deficit was NZ$7.8 billion (3.3 percent of GDP; it was 2.6 percent of GDP for the year ended September 2014).

"Falling dairy prices contributed to a drop in exports in the last year, while imports of goods increased almost across the board," Attewell said.

New Zealand's external debt position was NZ$141.3 billion (59.4 percent of GDP) at the end of Q4, down NZ$941 million.

New Zealand's net international liability position was NZ$153.9 billion (64.7 percent of GDP) in Q4, up $1.9 billion from the position at the end of the third quarter.

The increase in the liability position was driven by a net inflow of foreign investment into New Zealand, which funds the current account deficit, the bureau said.