New Zealand's current account deficit posted a rare
improvement in the three months ended September, figures
released by Statistics New Zealand yesterday showed.
The deficit came in at 4.7% of GDP (gross domestic product),
marginally smaller than the 4.8% recorded in the year to
The third-quarter result was also smaller than the 4.8%
expected by the market.
BNZ economist Doug Steel said in the big picture, the smaller
deficit was seen as a pause in the trend of deterioration
that had been talked about all year.
''We continue to anticipate a wider current account deficit
over the coming year, a result of investment outpacing
The BNZ forecast the deficit to push through 6% of GDP in the
One of the things to focus on next year was whether financial
markets and rating agencies would remain as sanguine towards
New Zealand as they were now, he said.
The relaxed and favourable global sentiment towards New
Zealand was reflected in the strength of the New Zealand
dollar and low long bond rates.
''In this context, and if the deficit evolves as we think it
will, there remains a risk that sentiment changes. This need
not necessarily mean a swing to the negative, especially
relative to the position of other countries.''
At the margin, a higher deficit could take the gloss off what
was otherwise a rose-tinted market view, Mr Steel said.
The external account figures did not alter the BNZ view of a
0.5% rise in quarterly GDP, out today.
As usual, there were some surprises in the current account
figures, he said. Some were expected, like the dairy-driven
lift in exports. They would also show up in today's GDP
figures where he expected the lift in export volumes to post
their strongest gain since at least 1987, when the present
GDP volume series began.
The implications for domestic production in the quarter would
be limited, as a ''decent chunk'' of the dairy exports and
increased meat exports came from lower inventory.
The strength of imports caused some surprise, although the
strength was around the timing of counting imports in the
trade figures (when goods crossed the border) and the timing
of counting imports in the current account (when ownership
• The balance of payments is a record that summarises all New
Zealand transactions with the rest of the world. It comprises
the current account and the capital account. The current
account records the net balance of tradeable goods and
services, net investment income received, and net transfers.
The capital account summarises capital flows in and out of