19 Dec 2013

New Zealand's current account position now beats Australia's

7:15 am on 19 December 2013

The historical track of New Zealand's annual current account deficit is now better than Australia's following revisions to the way it's calculated.

The deficit in the year ended September of $8.8 billion amounted to 4.1% of economic activity, up from 3.9% in the 12 months to June.

Westpac economist Michael Gordon says the revised figures show that since 1988, New Zealand's current account deficit has averaged 3.8% of economic activity compared with Australia's average 4.3% annual gap.

Mr Gordon says the revisions to the historical data should make international investors more pre-disposed to lend to New Zealanders.

He says the annual balance was more or less what the market expected and there has been some improvement to the data that Statistics New Zealand is working with including better estimates of spending by overseas visitors and students, as well as an estimate of low value goods.

"On balance it's lead to an improvement in the current account deficit over history in the ballpark of about 0.5% of GDP over the last year."

Mr Gordon says that should help with perceptions of New Zealand's overseas position because for a long time the country has been singled out as having a very large current account deficit by the standard of developed countries.

He says improvements to the measurement of the data means that historically New Zealand actually has a smaller current account deficit than Australia.

Mr Gordon says the revisions shaved about $1 billion, or half a percentage point of economic activity, off the latest annual deficit.

The deficit for the three months to September came in at $2.58 billion, $345 million larger than the June quarter's deficit.

Just over half of a $1.06 billion increase in imports was transport equipment and mechanical machinery, including some military helicopters.

Exports rose by $702 million, largely because of higher prices for dairy and forestry products.