Current account deficit narrows to $7.1 billion

The seasonally adjusted current account deficit narrowed by $1.7 billion to $7.1 billion in the June 2022 quarter, from $8.8 billion in the March 2022 quarter, Stats NZ said today.

The narrowing was mainly due to a $2.8 billion rise in the exports of goods and services, offset by a smaller $785 million rise in imports of goods and services. The primary and secondary income balance widened by $380 million.

Exports outpace imports

The value of New Zealand’s seasonally adjusted goods exports rose by $1.1 billion to $17.9 billion in the June 2022 quarter.

“Primary products including dairy, meat, and logs generally make up about half of New Zealand’s total goods exports by value and in the June quarter they continued to contribute to steady export growth. Meat and fruit exports, particularly kiwifruit, made the largest contribution to the increase in overall goods exports in the June quarter,” institutional sectors senior manager Paul Pascoe said.

The increase in goods export values reflected rises in both export prices, up 3.7 percent since the previous quarter, and export volumes, which were up 3.0 percent.

International trade: June 2022 quarter has more detail about the increases.

The value of New Zealand’s seasonally adjusted goods imports rose by $324 million to $20.1 billion in the June 2022 quarter.

“Goods imports have been on the rise since the June 2020 quarter, but the pace of increase has slowed in recent quarters. For the June 2022 quarter, diesel, petrol, and aviation fuel contributed to this increase,” Mr Pascoe said.

In the June 2022 quarter, goods import prices rose 6.5 percent, while goods import volumes fell 0.9 percent.

Travel services on the rise

The value of seasonally adjusted services exports rose by $1.8 billion to $4.5 billion, while services imports rose by $461 million to $6.2 billion in the June 2022 quarter.

“The rise in services exports was mainly due to travel services, which includes overseas visitors spending in New Zealand,” Mr Pascoe said.

Travel services exports were the highest since the June 2021 quarter, when the trans-Tasman travel bubble was in place, although they remained well below pre-COVID levels.

Border restrictions during the June 2022 quarter eased, which included removing all self-isolation requirements and widening traveller eligibility.

This quarter’s increase also follows an unseasonable low March 2022 quarter, where ongoing border restrictions affected travel services.

Border crossings lift again has more details about the overseas visitor arrivals in June 2022.

“Transportation services continued to be the main contributor to the June 2022 quarter rise in services imports, as freight services experienced ongoing COVID related disruptions,” Mr Pascoe said.

Annual current account deficit widens

The annual current account deficit continued to widen. In the year ended 30 June 2022, the annual current account deficit was $27.8 billion (7.7 percent of gross domestic product (GDP)), $16.3 billion wider than in the year ended 30 June 2021 (3.4 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).

Financial account records net inflow

The financial account shows the flows of investment into, and out of, New Zealand. In the June 2022 quarter, the financial account recorded a net inflow of $8.3 billion from overseas. This inflow helped to finance the current account deficit.

Overseas investors injected $5.5 billion into the New Zealand economy during the June 2022 quarter. By comparison, New Zealand residents reduced investment in overseas financial assets by $2.7 billion.

Net international investment liability position widens

New Zealand’s net international liability position was $179.3 billion (49.9 percent of GDP) at 30 June 2022, $17.7 billion wider than at 31 March 2022. This reflected a range of factors, including changes in the value of the New Zealand dollar relative to other currencies, asset and liability values, and investment flows into and out of New Zealand.

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.