Annual Current Account Deficit $27.8 Billion

New Zealand’s annual current account deficit was $27.8 billion (6.9 percent of gross domestic product (GDP)) in the year ended 31 December 2023, according to figures released by Stats NZ today.

The deficit was $5.6 billion narrower than the $33.4 billion deficit in the year ended 31 December 2022 (8.8 percent of GDP).

In the year ended 30 September 2023, the annual current account deficit was $29.8 billion (7.4 percent of GDP).

A current account deficit indicates that New Zealand is spending more than it is earning overseas. The size of the current account balance in relation to GDP shows its significance in the context of New Zealand’s overall economy.

In the year ended 31 December 2023, the narrowing annual current account deficit was driven by a $6.1 billion narrowing of the services deficit, and a $0.3 billion narrowing of the goods deficit. This was partly offset by a $0.8 billion widening of the primary income deficit.

Overseas visitor spending narrows services deficit

The spending by overseas visitors in New Zealand is called travel exports, while the spending by New Zealanders overseas is called travel imports.

In the year ended 31 December 2023, travel exports increased $6.8 billion to $12.9 billion. Related to the increase in travel exports, air transportation exports also increased $1.3 billion. Overall, services exports increased $9.0 billion in the year ended 31 December 2023.

“Most overseas visitor spending was by holiday makers from Australia, the USA, and the UK paying for things like their accommodation, meals, car rentals, and holiday activities while in New Zealand. This inflow of money from overseas visitors narrowed New Zealand’s services deficit,” institutional sectors senior manager Paul Pascoe said.

“In the December 2023 year, New Zealand’s travel imports increased $2.5 billion, mostly from New Zealanders spending money on overseas holidays,” Pascoe said.

Overall, services imports increased $2.9 billion in the year ended 31 December 2023.

Insurance services imports also increased $0.7 billion in the year ended 31 December 2023.

“This increase was due to the rising reinsurance costs to New Zealand insurers following extreme weather events in 2023,” Pascoe said.

Reinsurance occurs when insurance companies purchase insurance from other insurance companies to cover larger-than-usual claims, for example as a result of extreme weather events like Cyclone Gabrielle.