While economists saw the Statistics New Zealand data as encouraging, the "quality and sustainability" of the overall improvement was bought into question and, separately, ASB economist Nick Tuffley forecast the narrowing of the deficit would "run out of steam beyond year end".
"We expect the recent goods surpluses to be temporary. Over the next few quarters, the extent of underlying weakness in export demand becomes more apparent. Dairy production gains will start to taper off," Mr Tuffley said in a statement.
The current account deficit, or balance of payments, measures the country's trade flow and investment returns compared to the rest of the world.
The current account deficit for the year ended June was down from $14.6 billion last year (8.1% of gross domestic product then) to $10.6 billion, or 5.9% of GDP, a figure last seen in September 2004.
ANZ chief economist Cameron Bagrie said while the improvement was "obviously encouraging", the "quality and sustainability needs to be questioned".
The low second-quarter result was likely to see the annual current account deficit fall well below 5% of GDP during coming quarters, but with falling imports, low interest rates and lower profitability of foreign countries, that all added up to being cyclical in nature, he said.
"We continue to believe a lower currency is a critical, though obviously missing, ingredient, if the economy is set to rebalance in a sustainable fashion," Mr Bagrie said.
The current account deficit for the year shrank because foreign investment in New Zealand was $2.3 billion lower than a year ago, while the quarterly surplus came from the BNZ tax provisioning, weak imports, lower debt servicing costs and an underlying weakness in domestic profitability, Mr Tuffley said.
Finance Minister Bill English said the data showing New Zealand's current account deficit at a five-year low was encouraging, but more work was needed to narrow the trade and investment gap with the rest of the world by lifting exporting performance.
"News our current account deficit has hit a five-year low is positive. However, this has occurred on the back of a big fall in imports and a drop in company profits flowing offshore largely in the banking sector," Mr English said in a statement yesterday.
Separate to the current account data yesterday, the New Zealand Institute of Economic Research, for the first time in more than a year revised upwards economic growth prospects, but also with question marks over sustainability and trends in the exchange rate.
NZPA reported from NZIER's latest consensus forecasts survey that the growth prospects were consistent with accumulating evidence of improving economic trends.
The forecasts are an average of New Zealand economic forecasts compiled from a survey of financial and economic agencies for the year to March.
However, there is a wide divergence of views on the sustainability of the current recovery and the path of the exchange rate, the survey found.
Surveyed forecasters remained pessimistic on the labour market, with the unemployment rate expected to peak at 7.3% (from 6% now) and a further 30,000 job losses by March 2011.
