Good economic data continues to flow into the marketplace, calling into question the Government's continuing cautiousness about the strength of the economic recovery.
Yesterday, Statistics New Zealand figures showed that New Zealand's quarterly external accounts moved back into surplus, narrowing the annual current account deficit to 2.4% of gross domestic product - the lowest in 20 years and narrower than market expectations.
The current account recorded an unadjusted surplus of $176 million in the three months ended March.
After adjusting for seasonal effects, the current account recorded a deficit of $1.3 billion, compared with the December quarter's deficit of $2.9 billion.
It was the first March quarter since 2003 that New Zealand had earned more from overseas than it had spent abroad.
ANZ-National Bank chief economist Cameron Bagrie said the better-than-expected result was driven by a lower investment income deficit, reflecting lower profits being earned by foreign-owned firms.
"Today's numbers point to a much needed rebalancing of the New Zealand economy.
"It was also pleasing to see an improvement in the net international investment income position.
"However, we believe the trough in the current account deficit is at hand."
Like other economists, Mr Bagrie believed the deficit would start to head towards 4% of GDP by the end of the year as the economy continued to recover.
SNZ figures showed that profits earned abroad by New Zealand-owned subsidiaries rose to their highest level since the December 2007 quarter.
Another factor for the good results was a $624 million rise in the surplus on the balance of goods to $919 million - the sixth consecutive goods balance surplus and the largest goods surplus since 2001.
Goods exports rose a seasonally adjusted $1.22 billion in the March quarter from the previous three months.
Imports rose $595 million.
The improvement in exports was mainly due to a 32.1% rise in dairy prices, driving dairy exports to their highest level since their peak in the December 2008 quarter.
Mr Bagrie said there were no monetary policy implications from yesterday's release.
In terms of the implications for today's first-quarter GDP figures, export volumes looked to be weaker than previously expected.
That was partly offset by weaker import growth.
The Government continues to urge restraint on its spending and holds chief executives to account for finding better ways to spend their allocated budgets but recent Treasury figures have indicated the Government is on its way to an operating surplus, from a huge forecast deficit.
Unemployment peaked much lower than the previously forecast 7.2%, business confidence indicators are improving and the NZIER consensus forecasts show optimism the economic recovery is sustainable.
Economists are always cautious about predicting too many good times ahead, but the Government must soon start acknowledging the improved situation.
BNZ senior economist Craig Ebert said the current account headlines looked good but they were achieved for all the wrong reasons.
"We forecast renewed deterioration as cyclical reprieves unwind and New Zealand's large net borrowings from abroad remain a big drag on the external accounts."
At a glance:
• First-quarter current account better than market imagined
• Annual deficit shrinks to 2.4% of GDP
• But expansion likely in coming years
• GDP growth picked at 0.5%
