The annual national current account deficit unexpectedly narrowed in June, and Westpac Bank says data improvements painted a more flattering picture of the deficit, but it does expect it to widen.
Official figures show the seasonally adjusted current account deficit stood at $2.2 billion in the three months to June, $148 million larger than in the March quarter.
However, on an annual basis the deficit has narrowed to $9.1 billion, or 4.3% of gross domestic product, compared with a downwardly revised $9.5 billion, or 4.5% of GDP in the March year.
Quantities of meat and dairy products declined due to the drought, and the impact of this on exports was partly offset by a fall in profits earned by foreign-owned companies in New Zealand.
Chief economist at Westpac Dominick Stephens said the bank had been expecting an annual deficit of 4.8%.
"What happened is that Statistics New Zealand has revised history. They've discovered that New Zealanders have been earning more on their investments overseas than they had previously realised," Mr Stephens said.
"Of course, if New Zealanders earn money from overseas, that counts as a credit on the current account balance and reduces the overall deficit."
Economists had long argued that New Zealand's current account deficit was overstated, and that was because New Zealanders earning money overseas from their investments overseas had an incentive to under-report it.
"In essence, they don't always want to let the taxman know and, if the taxman doesn't know about it, neither does the statistician," Mr Stephens said.