Story image

NZ current account deficit widens in 4th-qtr, as foreign companies earn more

18 Mar 15

New Zealand's current account deficit widened in the fourth quarter, pushing the annual gap to 3.3 percent of gross domestic product, as a growing economy helped foreign companies earn more from local investments.

The current account deficit widened to $2.6 billion, seasonally adjusted, the largest since the fourth quarter of 2008, and from about $2.4 billion three months earlier, according to Statistics New Zealand. The annual deficit was $7.8 billion, about matching the forecast in a Reuters survey, from a deficit of $6.1 billion, or 2.6 percent of GDP, in the year ended Sept. 30.

The current account is the broadest measure of the flow of goods and services across the border and a widening gap traditionally signals a risk for the currency as it shows a nation is spending more than it earns. The income deficit grew by $434 million to $2.8 billion, the highest since the fourth quarter of 2010, reflecting more income earned from foreign investments in New Zealand and less income earned from investments abroad.

"Companies tend to earn higher profits when the economy is growing," said Jason Attewell, the government statistician's international statistics manager.

"Most of this quarter's increase in profits earned by foreign-owned companies in New Zealand was reinvested back into the company," he said. "In addition, companies were able to pay more dividends to their overseas portfolio shareholders this quarter, reflecting recent growth in the New Zealand economy."

The actual current account deficit was $3.19 billion in the latest quarter, about matching the forecast in the Reuters survey of $3.15 billion, and narrower than the $5.01 billion gap in the third quarter.

The increase in the annual deficit was largely driven by a decline in the goods surplus, reflecting weaker dairy prices, while a range of imported commodities rose.

The balance on services turned to a surplus of $655 million in the fourth quarter, up from $424 million three months earlier, which mainly reflected an increase in exports of travel services, driven by overseas visitors spending more.

The fourth-quarter data shows a $3.8 billion net inflow of investment into New Zealand, mainly reflecting foreign companies increasing their equity in local subsidiaries and also foreigners investing in New Zealand-owned companies. New Zealand investment abroad of $423 million reflected local fund managers buying overseas shares, which was offset by the Reserve Bank reducing overseas reserves, the government statistician said.

New Zealand's net international liability position increased to $153.9 billion, or 64.7 percent of GDP as at Dec. 31, from a revised $152 billion, or 64.2 percent, at Sept. 30.

Still, the nation's net external debt position, which excludes equity and financial derivatives, fell to $141.3 billion, or 59.4 percent of GDP at the end of 2014, from $142.2 billion, or 60.1 percent three months earlier. That reflected New Zealand companies borrowing less from their foreign parents in the latest quarter, Statistics New Zealand said.

How blockchain will impact NZ’s economy
Distributed ledgers and blockchain are anticipated to provide a positive uplift to New Zealand’s economy.
25% of malicious emails still make it through to recipients
Popular email security programmes may fail to detect as much as 25% of all emails with malicious or dangerous attachments, a study from Mimecast says.
Human value must be put back in marketing - report
“Digital is now so widely adopted that its novelty has worn off. In their attempt to declutter, people are being more selective about which products and services they incorporate into their daily lives."
Wine firm uses AR to tell its story right on the bottle
A Central Otago wine company is using augmented reality (AR) and a ‘digital first’ strategy to change the way it builds its brand and engages with customers.
DigiCert conquers Google's distrust of Symantec certs
“This could have been an extremely disruptive event to online commerce," comments DigiCert CEO John Merrill. 
Protecting organisations against internal fraud
Most companies tend to take a basic approach that focuses on numbers and compliance, without much room for grey areas or negotiation.
Telesmart to deliver Cloud Calling for Microsoft Teams
The integration will allow Telesmart’s Cloud Calling for Microsoft Teams to natively enable external voice connectivity from within Teams collaborative workflow environment.
Jade Software & Ambit take chatbots to next level of AI
“Conversation Agents present a huge opportunity to increase customer and employee engagement in a cost-effective manner."