25 Mar 2010

Annual current account deficit at 8-year low

6:42 am on 25 March 2010

The deficit between what New Zealand spends overseas and what it earns is at its smallest level in eight years.

Statistics New Zealand says the current account deficit stood at 2.9% of gross domestic product at the end of 2009, dropping sharply over the last year.

On an annual basis, the deficit narrowed to $5.5 billion. The seasonally adjusted deficit stood at $3.1 billion.

The drop in the deficit was mainly due to fewer imports and smaller profits paid to foreign investors as a result of the recession.

Tax refunds paid by Australian-owned banks after settling tax avoidance cases also contributed to the improvement.

But this trend turned around in the three months to December, with the largest quarterly deficit in a year.

Dividends paid to foreign owners of local companies rose after four quarters of falling profits.

Goldman Sachs JB Were economist Philip Borkinsays the deficit is set to widen later in the year to about 5% of GDP by early 2011, as import demand picks up and the country repays 156 billion of net debt.