Bumper quarter for current account

Meat exports are behind a record $1.4 billion current account surplus for the quarter to March, underpinned by increased tourism spending.

While economists have warmed to the positive data from Statistics New Zealand (SNZ), some are warning of a dampening effect from commodity price declines later in the year.

A current account surplus means New Zealand's earnings from the rest of the world have exceeded its overseas expenditure.

SNZ international statistics manager Jason Attewell said the increase in the value of goods exports and higher spending by overseas visitors reduced the current account deficit in the quarter to March.

''As a result, we had $1.3 billion of net outward investment from New Zealand this quarter, mostly due to the Reserve Bank of New Zealand increasing its foreign exchange assets,'' he said.

ASB economist Christina Leung said the current account surplus was in line with market expectations, but slightly more positive than expected.

''While dairy exports eased from the record highs in the previous quarter, this was more than offset by the very strong growth in meat exports in the first quarter,''she said.

Services exports were also slightly stronger than expected, reflecting ''strong spending'' from the higher number of overseas visitors to New Zealand during the quarter.

While growth in meat and dairy exports has been a key driver of the current account over the past year and Ms Leung expected the annual deficit to continue to narrow over much of 2014, she believed it would widen again from later in the year as global commodity prices fell from record levels.

BNZ chief economist Craig Ebert said the deficit's ongoing shrinkage in the year to March 2014, to $6.3 billion, or 2.8% of GDP, from $7.6 billion, or 3.4% of GDP, in calendar 2013, rested a lot on the 40-year highs in New Zealand terms of trade.

''And that impulse has more recently started to abate.''

While prices in the global dairy trade auction on Tuesday night increased 0.9%, they are down about 25% since February and are likely to decline more in the months ahead.

He noted meat export prices continued to strengthen, and wool prices had achieved year-to-date highs.

''However, forestry product export prices are coming off the boil, and noticeably for logs, integral to China's slowdown story,'' Mr Ebert said.

 

simon.hartley@odt.co.nz

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