Annual current account deficit widens to $33.8 billion

The annual current account deficit was $33.8 billion (8.9 percent of gross domestic product (GDP)) in the year ended 31 December 2022. This was $12.7 billion wider than in the year ended 31 December 2021 (6.0 percent of GDP), according to figures released by Stats NZ today.

This is the largest annual current account deficit to GDP ratio since the series began in March 1988. The largest prior to the COVID pandemic was 7.8 percent of GDP in December 2008, during the global financial crisis.

A current account deficit reflects that we are spending more than we are earning overseas. The size of the current account balance in relation to GDP shows its significance in the context of New Zealand's overall economy.

The widening in the annual current account deficit was mainly due to a $10.0 billion widening of goods and services deficit and $2.7 billion widening of the income deficit.

High imports values drive the current account deficit

For the year ended 31 December 2022, imports of goods and services increased $23.0 billion (25.8 percent) to $112.2 billion.

The increase in goods imports was driven by machinery, petrol, and motor vehicles. The increase in services imports was driven by transportation services, business services, and travel services.

"Since New Zealand's borders opened more New Zealanders have been travelling overseas. The spending on both air transport and travel contributed to the rise in services imports for the year to December 2022," institutional sectors senior manager Paul Pascoe said.

For the year ended 31 December 2022, exports of goods and services increased $13.1 billion (16.8 percent) to $90.7 billion. Dairy and meat products contributed to the increase in goods exports, while the increase in services exports was driven by travel services - the spending of overseas visitors in New Zealand.

Primary income deficit widens

In the year ended December 2022, the primary income deficit widened to $11.9 billion.

Primary income balance is mainly made up of what New Zealanders earn from overseas investments, less what overseas investors earn from their New Zealand investments.

"In the December 2022 year, we earned less from overseas investments than overseas investors earned from their New Zealand investments. This resulted in a primary income deficit," Pascoe said.

Seasonally adjusted current account deficit widens in the quarter

The seasonally adjusted current account deficit widened by $1.4 billion to $8.5 billion in the December 2022 quarter, from $7.1 billion in the September 2022 quarter.

Without seasonal adjustment, the actual current account deficit narrowed to $9.5 billion in the December 2022 quarter, from $11.4 billion in the September 2022 quarter.

Seasonally adjusted series are subject to revision as we better understand how seasonal patterns have evolved since COVID-19 impacts first started. For example, changes to border restrictions lead to movements in the data that are different from the long-term seasonal pattern for travel services.

Financial account records a net inflow of $3.3 billion

The financial account shows the flows of investment into, and out of, New Zealand. In the December 2022 quarter, the financial account recorded a net inflow of $3.3 billion, a $1.9 billion decrease from the previous quarter. This inflow helped to partly finance the current account deficit.

Overseas investors reduced a net $686 million of their investment in New Zealand, while New Zealand residents reduced investment in overseas financial assets by a net $4.0 billion.

Net international liability position slightly narrows

The net international investment position represents the difference between New Zealand's financial assets and liabilities with the rest of the world. New Zealand has a net liability position as we have more liabilities with the rest of the world than we do assets.

New Zealand's net international liability position was $192.9 billion (50.7 percent of GDP) at 31 December 2022, $1.7 billion (0.9 percent) narrower than at 30 September 2022.

Cyclone Gabrielle will affect the data collected for the Balance of payments and international investment position: March 2023 quarter release. Adverse weather conditions in early 2023 to be reflected in economic statistics has more details.