18 Mar 2015

Current account deficit widens

3:05 pm on 18 March 2015

The current account deficit has widened due to a robust domestic economy.

Official figures showed the seasonally adjusted deficit, which was a broad measure of the country's international dealings, increased to $2.6 billion in the three months to December, compared with a $2.4 billion shortfall in the previous quarter.

The primary income deficit hit its highest level in four years at $2.8 billion, due to the growing economy boosting the profits of foreign-owned companies.

Statistics New Zealand said most of the quarter's increase in profits earned by foreign-owned firms was reinvested back into the company, while they also paid more dividends to their overseas investors.

The goods deficit widened to $458 million as imports increased by more than exports, though the services surplus improved as tourists spent more while in New Zealand.

On an annual basis, the current account deficit rose from $6.1 billion to $7.8 billion, or 3.3 percent of national output.

The net international liability position, which measures the value of the country's overseas asset less overseas liabilities, rose to $153.9 billion, of 64.7 percent of GDP.

Net external debt fell to $141.3 billion, or 59.4 percent of GDP, due to New Zealand companies borrowing less from their overseas parents.

Senior economist at ANZ Bank Philip Borkin said the widening deficit can be viewed two ways.

"The deficit is widening and reminds us of the vulnerabilities that are still present with New Zealand's economy. Also, if you look at the reasons why the deficit widened it was because firms operating in New Zealand are earning more profits.

"It's a decent sign for investment, employment and it highlights the underlying strength of the domestic economy itself," he said.