19 Mar 2014

Record dairy exports narrow deficit

6:21 pm on 19 March 2014

The difference between what New Zealand earns and spends internationally has narrowed, due to record dairy exports.

Official figures show the seasonally adjusted current account deficit shrank to $837 million in the three months to the end of December, compared with a $2.58 billion shortfall in the previous quarter. That's the smallest quarterly shortfall in nearly four years.

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Photo: PHOTO NZ

A sharp rebound in dairy sales overseas following last year's severe drought helped bolster exports to $1.8 billion, the largest quarterly surplus since the series began in 1987.

That's been partly offset by a bigger investment income deficit, with an accelerating economy helping foreign-owned companies in New Zealand earn their highest profits in four years.

On an annual basis, the current account deficit narrowed to $7.5 billion, or 3.4 percent of national output, from $8.9 billion in September.

Economists expect the deficit will continue to narrow in the short term due to high dairy prices.

However, that should reverse over time due to the faster growing economy generating more demand for imports, as well as bolstering the profits of foreign-owned local firms.

On an annual basis, the current account deficit narrowed to $7.5 billion, or 3.4 percent of GDP.

New Zealand's net international liabilities fell slightly to $147.6 billion, or 67 percent of GDP.