Strong export growth narrows current account deficit to $3.0 billion

The seasonally adjusted current account deficit narrowed to $3.0 billion in the June 2021 quarter, Stats NZ said today.

The current account deficit was $2.2 billion narrower than the previous quarter due to an increase in value of goods exports (up $1.4 billion) and services exports (up $1.7 billion). These increases to exports narrowed the goods deficit and the services deficit by more than $1.0 billion each.

Value of goods exports grow almost 10 percent

Seasonally adjusted goods exports were worth $16.0 billion in the June 2021 quarter, a new high for the series.

Goods exports grew $1.4 billion mainly due to four key commodities:

• milk powder, butter, and cheese
• logs, wood, and wood articles
• meat and edible offal
• mechanical machinery and equipment.

Of those commodities, two have shown consistent growth since the June 2020 quarter lockdown:

• dairy products such as milk powder, butter, and cheese, and
• logs, wood, and wood articles.

"Construction materials have been in high demand over the last year, and the export price per unit of logs has steadily increased," international statistics senior manager Darren Allan said.

Cost of crude oil fuels goods deficit

New Zealand's goods deficit narrowed to $358 million in the June 2021 quarter.

New Zealand's seasonally adjusted goods imports were worth $16.4 billion, an increase of $358 million. One of the biggest drivers of this increase was a rise in the value of crude oil, which almost doubled in value compared with the previous quarter.

"Crude oil prices rose around the world as people in more and more countries started travelling again. So, while New Zealand might not be using twice as much crude oil, the increased price per litre is helping to drive the value of our imports up," Mr Allan said.

Services exports rebound following 20-year low

Seasonally adjusted services exports recovered slightly after dropping to a 20-year low in the March 2021 quarter:

• Services exports were worth $4.1 billion in the June 2021 quarter, growing $1.7 billion.
• Travel services exports rose $646 million, partly reflecting an increase to spending by non-residents coming to New Zealand under quarantine-free travel arrangements.

"We can see the effect of quarantine-free travel with Australia and the Cook Islands in the June 2021 quarter. For a short time, we saw more non-residents come into New Zealand and spend on services like hotels, taxis, and tourist attractions," Mr Allan said.

Travel services exports weren't the only contributor to the services export growth. Other increases included personal, cultural, and recreational services; and other business services.

Services exports remain well below pre-COVID-19 levels, which were worth $6.8 billion in the March 2020 quarter.

Value of transport imports drive services deficit

Seasonally adjusted services imports have steadily grown since the September 2020 quarter:

• Services imports were worth $4.7 billion in the June 2021 quarter, up $440 million.
• Transport services imports rose to $1.0 billion - a similar level to what was seen in the March 2020 quarter ($1.2 billion).

"Increased freight costs and supply chain pressures continue to push the value of transport imports up, " Mr Allan said.

Overall, New Zealand remained in a services deficit of $557 million in the June 2021 quarter.

Annual current account deficit widens significantly

The annual current account deficit was $11.2 billion in the year ended June 2021 (3.3 percent of GDP), $6.5 billion wider than the year ended June 2020.

The change from a services surplus to a services deficit was the biggest driver of change to the current account. New Zealand has only had an annual services deficit twice in the past 20 years; in the year ended March 2021, and year ended June 2021.

International assets continue to increase

Despite the turmoil of the COVID-19 pandemic, the value of New Zealand's international assets at 30 June 2021 increased by $33.0 billion compared with 30 June 2020. The biggest driver to asset growth was portfolio investment assets, which increased by $49.9 billion.

"Equity and investment fund shares, including things like KiwiSaver funds and the New Zealand Super Fund, experienced a big rise in the value of their assets over the last 12-months. Kiwis are likely to have seen a bit of an increase to their funds over this time period," Mr Allan said.

Asset growth has outpaced the growth of liabilities, with international liabilities growing $7.1 billion in the last year.

Net liability position narrows

For the second quarter in a row, the net liability position narrowed. At 30 June 2021, the liability position was $155.4 billion, $25.9 billion narrower than at 30 June 2020.