Current account deficit remains stable

New Zealand’s seasonally adjusted current account deficit was steady at $2.6 billion in the March 2019 quarter, largely unchanged from the December 2018 quarter’s deficit, Stats NZ said today.

The current account balance records the value of New Zealand’s transactions with the rest of the world in goods, services, and income. It is an important indicator of the economy’s health. New Zealand has a current account deficit when we spend more than we earn from our transactions with the rest of the world.

The current account shortfall in the March 2019 quarter was slightly smaller than the previous quarter. This was mainly due to New Zealand making more from overseas investments, while foreign investors made less in New Zealand. This resulted in a narrower primary income deficit this quarter.

A smaller goods deficit was offset by a fall in the services surplus compared to last quarter. The overall effect on the current account was small.

“New Zealand’s current account deficit has remained fairly stable over the past four quarters, compared with the volatility seen during the last decade,” international statistics senior manager Peter Dolan said.

Significant global events can cause spikes in the current account balance as was seen during the global financial crisis in 2008/09 and the dairy price boom in 2013/14.

Year ended in quarter Goods and services balance Current account balance Primary and secondary income balance
Mar-09 1060000000 -1939000000 -2999000000
Jun-09 1047000000 -313000000 -1360000000
Sep-09 1364000000 334000000 -1030000000
Dec-09 789000000 -2432000000 -3222000000
Mar-10 1244000000 -488000000 -1732000000
Jun-10 1679000000 -889000000 -2568000000
Sep-10 1226000000 -990000000 -2217000000
Dec-10 667000000 -2150000000 -2818000000
Mar-11 1042000000 -1639000000 -2681000000
Jun-11 1160000000 -1251000000 -2411000000
Sep-11 828000000 -1732000000 -2560000000
Dec-11 1336000000 -1296000000 -2632000000
Mar-12 -86000000 -2482000000 -2396000000
Jun-12 427000000 -2236000000 -2662000000
Sep-12 462000000 -1792000000 -2254000000
Dec-12 202000000 -1964000000 -2166000000
Mar-13 423000000 -1955000000 -2378000000
Jun-13 121000000 -2151000000 -2272000000
Sep-13 113000000 -2091000000 -2204000000
Dec-13 1742000000 -837000000 -2580000000
Mar-14 1777000000 -788000000 -2564000000
Jun-14 511000000 -2147000000 -2659000000
Sep-14 130000000 -2268000000 -2398000000
Dec-14 424000000 -2259000000 -2683000000
Mar-15 751000000 -1731000000 -2482000000
Jun-15 398000000 -2114000000 -2512000000
Sep-15 752000000 -1447000000 -2199000000
Dec-15 419000000 -1826000000 -2245000000
Mar-16 863000000 -1133000000 -1996000000
Jun-16 676000000 -1378000000 -2054000000
Sep-16 460000000 -1897000000 -2357000000
Dec-16 548000000 -1336000000 -1884000000
Mar-17 137000000 -2525000000 -2662000000
Jun-17 860000000 -1621000000 -2480000000
Sep-17 1069000000 -1902000000 -2971000000
Dec-17 779000000 -2073000000 -2852000000
Mar-18 -344000000 -3112000000 -2768000000
Jun-18 21000000 -2716000000 -2736000000
Sep-18 95000000 -2546000000 -2641000000
Dec-18 -60000000 -2674000000 -2615000000
Mar-19 -87000000 -2614000000 -2527000000

Net international investment position narrows

Our net international investment position represents the difference between New Zealand’s assets and liabilities with the rest of the world.

At 31 March 2019 our international assets were $269.2 billion, $10.0 billion larger than at 31 December 2018. Our international liabilities were $433.6 billion, up $6.0 billion. Since our international liabilities were larger than our international assets, this resulted in a net liability position of $164.4 billion, which was $4.0 billion smaller than at 31 December 2018.

“In the latest quarter there was a strong rebound in global share markets which saw increases in the value of both our assets and our liabilities,” Mr Dolan said. “This follows the December 2018 quarter when share markets around the world fell and large market price changes decreased the value of our assets more than the value of our liabilities.”

The smaller net liability position at 31 March 2019 was mainly due to changes in the valuation of New Zealand’s international assets and liabilities. Changes in market prices, exchange rates, and other valuations increased the value of our assets more than the value of our liabilities. Money moving in or out of New Zealand (net financial account flows) had a relatively small impact on the net international investment position this quarter.

Component December 2018 March 2019
Change in net international investment position -12066000000 4004000000
Net valuation changes -10451000000 4730000000
Net financial account flows -1615000000 -726000000

Ratio of net international investment position to GDP – country comparison

New Zealand has invested much less overseas than overseas investors have in New Zealand, but as a share of GDP, the net international liability position is similar to Australia and the United States.

Country Ratio
New Zealand -57
Australia -51
United States -47.4
United Kingdom -6.7
Germany 60.6
Netherlands 68.9
France -11.4
Denmark 63.2

/Stats NZ Public Release. View in full here.