New Zealand's current account deficit has pushed out beyond
expectations to 5% of gross domestic product (GDP), hitting
$10.5 billion for the full-year 2012.
Some analysts see the incremental, but headline move to 5% of
GDP, as the thin end of the wedge. The deficit could reach 6%
of GDP by the end of this year and pass 7% during 2014.
The current account, measuring the country's trade flows and
investment returns, saw the fourth-quarter current account
deficit rise to $3.25 billion, higher than market
expectations of a $2.95 billion deficit, according to
Statistics New Zealand data released yesterday.
ASB senior economist, Jane Turner, said the wider deficit was
due to increased investment income outflows from a
bounce-back in profitability of foreign-owned NZ companies,
which followed a weaker profit outflow in the previous
''Over the past year, foreign-owned companies have increased
their reinvestment rate in New Zealand businesses, with the
proportions of profits paid as dividends falling,'' she said.
The annual current account deficit was largely due to the
smaller goods surplus because of lower dairy export prices.
''Over the coming year, we expect the drought to have a mixed
impact on the current account, with some offsetting
price/volume movement for both dairy and meat,'' she said.
BNZ economist, Doug Steel said he thought the imbalances
appeared set to worsen.
''We see today's outcome as part of the bigger slippery slope
that we think the external accounts are on. We see the
current account deficit nudging 6% of GDP by the end of 2013
and 7% by the end of 2014,'' he said.
While the 5% current account deficit was only ''mild
slippage'' from the previous quarter's 4.7%, it was in line
with Mr Steel's expectations and only slightly wider than the
4.9% expected by the market. Hitting 5% breached a
The increased deficit was mainly due to a $1.3 billion fall
in exports of goods and services, while exports of dairy and
crude oil both fell.
SNZ balance of payments manager John Morris said overseas
visitor spending had fallen after the Rugby World Cup.