18 Sep 2019

Balance of payments deficit narrows

2:40 pm on 18 September 2019

The difference between what the country earns and spends overseas has narrowed slightly.

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Official figures showed the current account deficit for the year ended September was $10.2 billion. Photo: 123RF

Official figures showed the current account deficit for the year ended September was $10.2 billion, down from $10.8bn in June.

That amounted to 3.4 percent of the value of the economy from 3.6 percent in the previous quarter, but marginally higher than a year ago.

The reduced deficit came from an improvement in exports which narrowed the shortfall in trade, while the surplus on services, such as tourism, improved.

"With no large movements in our top exports, the smaller goods deficit was driven by a rise in other commodities including infant formula, crude oil, and aluminium," Stats NZ senior manager Peter Dolan said.

On a quarterly basis, the actual current account for the three months ended September was a deficit of $1.1bn, compared with a deficit of $1.6bn a year earlier.

On a seasonally adjusted basis, which smoothes out one-off events and influences, the quarterly deficit also narrowed slightly to $2.4bn.

The balance of payments broadly measures the country's ability to pay its way in the world and how much may need to be borrowed.

Westpac senior economist Satish Ranchhod said the numbers were largely in line with expectations.

"There was an improvement in the goods trade balance. That was supported by an increase in exports as rising prices outweighed a pullback in volumes. Import volumes were effectively flat over the quarter."

Credit rating agencies watch deficits as a sign of an economy's indebtedness.

The net deficit of the economy's investment liabilities - the difference between what New Zealand has invested overseas and what foreign investors own in New Zealand - rose slightly to 55.3 percent of gross domestic product, but remains near its lowest level in nearly 20 years.