The deficit widened to 2.9% of gross domestic product, compared to a forecast 2%, and blew out to $3.5 billion compared with an expected $1.6 billion.
ASB chief economist Nick Tuffley said the surprise was due to a weaker goods balance and a wider investment income deficit.
The outflow of investment income to foreign owners lifted sharply, and the investment income deficit was much wider than expected.
Statistics New Zealand noted in its release that it was the largest increase in the deficit since the series began.
Mr Tuffley said the sharp turn around was in part due to distortions relating to tax provisions, as well as a strong improvement in underlying profitability of foreign-owned New Zealand businesses.
In the past few quarters, the balance had been affected by provisions for the structured finance tax cases by Australian-owned banks.
The case was settled in December.
Some of the banks had over-provisioned leading to positive write-backs in December of $379 million.
That partly exaggerated the lift in investment income outflow, he said.
"In addition, the underlying profitability of corporate New Zealand appears to have improved much more than we had assumed.
"Although this has widened the current account deficit, the driver of the lift likely relates to the recovery of the New Zealand economy, which is an encouraging sign from an economic growth perspective," he said.
The traded goods balance was weaker than expected due to stronger imports.
Seasonally adjusted, the goods balance was still in surplus, although it was smaller than the previous quarter ($237 million against $587 million).
Mr Tuffley said the goods balance surpluses recorded throughout 2009 were due to a fall in import demand during the recession.
As domestic demand started to improve, the surplus was starting to narrow and was likely to return to deficit over 2010.
The services balance recorded a small deficit, in contrast to expectations of a small surplus.
Exports of services were weaker than expected.
Statistics NZ said that while tourist numbers increased and the average number of days spent in New Zealand increased, the average spend per tourist still declined.
Tourist spending over the second half of last year was buoyed by an increase in Australian visitors.
Mr Tuffley said the pattern or rising current account outflows - expenditure on imports and higher profits for foreign-owned companies - was expected to continue as the domestic economy recovery continued.
Rising debt servicing costs for the Government would also contribute to a larger deficit in the medium term.
The current account deficit was expected to widen to around 5% of GDP next year, still below the average of the preceding 10 years.
An increasing proportion of the deficit's funding would effectively be done by the Government as it raised large amounts of debt in the years ahead, mainly from foreign investors, he said.
The ability to do that depended on New Zealand's relative attractiveness, including factors such as a credible effort to rein in government debt levels, interest rate levels and economic prospects.
"In many respects, New Zealand would appear a better bet than some of the larger, yet more indebted, developed economies," Mr Tuffley said.
