18 Jun 2014

Current account deficit falls

9:11 pm on 18 June 2014

The gap between what New Zealand earns and spends internationally has narrowed to its smallest amount in four years.

Official figures show the seasonally adjusted current account deficit shrunk to $585 million in the first three months of the year, compared with a $921 million shortfall in the previous quarter.

Statistics New Zealand said the decrease was due to rising exports, particularly meat, and higher spending by visitors to New Zealand.

In actual terms, the country recorded a surplus of $1.4 billion - the largest-ever since the series began and only the sixth time in a decade it has recorded a quarterly surplus.

On an annual basis, the deficit declined at $6.3 billion, or 2.8 percent of gross domestic product (GDP), mainly due to higher exports of dairy products. That compares with a deficit of $7.6 billion, or 3.4 percent of GDP, for calendar year 2013.

Westpac economist Michael Gordon said the headline numbers and the details were much as expected.

"In the more frequent trade figures, we've seen the goods exports pick up quite significantly, so we've really just had a period where dairy and meat volumes are very high.

"They're also really capturing the peak in prices, so dairy prices are really at their peak earlier in the year, and that was captured in the latest figures."

Economists say the current account deficit is expected to deteriorate from now on due to declining commodity prices and rising demand for imports.