Current account deficit continues to widen

The seasonally adjusted current account deficit widened to $8.5 billion in the March 2022 quarter, from $6.6 billion in the December 2021 quarter, Stats NZ said today.

The current account deficit was $1.9 billion wider than the previous quarter, mainly due to an $871 million rise in the value of goods imports and an $831 million fall in the value of services exports.

Services deficit continues to widen

In the March 2022 quarter, New Zealand’s seasonally adjusted services deficit widened by $1.1 billion to $3.0 billion.

Services exports fell by $831 million to $2.7 billion in the March 2022 quarter. Pre-COVID, the March quarter was typically the peak quarter for overseas travel to New Zealand. Services imports, which includes freight services, rose by $238 million to $5.7 billion.

Annual current account continues to widen

In the year ended March 2022, the annual current account deficit was $23.3 billion (6.5 percent of gross domestic product (GDP)). This compares with $20.3 billion for the year ended 31 December 2021 (5.8 percent of GDP).

The largest annual current account deficit prior to the COVID pandemic was $14.7 billion in the December 2008 year during the global financial crisis (7.8 percent of GDP).

In the year ended March 2022, the annual goods deficit widened by $1.3 billion to $7.4 billion, compared with the year ended December 2021, while the annual services deficit widened by $1.0 billion to $6.4 billion. This reflected strong demand for goods imports, a rise in transport services imports, and a smaller rise in services exports.

Financial account

The financial account shows the flows of investment into, and out of, New Zealand.

In the March 2022 quarter, the financial account recorded a net inflow of $4.5 billion from overseas investors. This inflow helped to partly finance the current account deficit.

Net international investment liability position narrows

New Zealand’s net international liability position was $160.2 billion (45.0 percent of GDP) at 31 March 2022, $2.2 billion narrower than at 31 December 2021.

The net international investment position represents the difference between New Zealand’s financial assets and liabilities with the rest of the world. New Zealand has a net liability position as we have more liabilities with the rest of the world than we do assets.

“The narrowing of our liability position was mainly due to market price changes. These changes reduced the value of our overseas financial liabilities more than our overseas financial assets. The net effect meant that we owed less to the rest of the world at the end of March 2022,” Mr Pascoe said.

In the March 2022 quarter, the impact of market price changes reduced the value of New Zealand’s financial liabilities to overseas investors by $14.8 billion and reduced the value of New Zealand’s assets held abroad by $6.8 billion.