With the Government's operating balance moving closer to surplus each month, some changes may have to be made to 2011 forecasts.
Westpac chief economist Brendan O'Donovan is expecting the current account deficit to have narrowed to 2.4% of GDP (gross domestic product) in the year to March.
The average forecast from various sources is for the current account deficit to come in at 2.7% of GDP.
The trade balance had improved substantially, with exports boosted by strong demand from Asia. Import demand was picking up only gradually.
"Right now, global markets are gunning for countries that run persistently ugly current account deficits. A year ago, New Zealand could have been at the top of the hit list with the deficit reaching 8.7% of GDP by the end of 2008.
"But since then, the deficit has narrowed so dramatically that it would now be the envy of many developed nations," he said.
The main feature of the first-quarter data was an improvement in the trade balance, with Mr O'Donovan saying he anticipated the largest quarterly trade surplus on record.
Export and import prices were both down about 8% due to the rebound in the exchange rate. But in real terms, exports had been the star performer of the New Zealand economy with volume up nearly 10% compared with the three months ended March last year, Mr O'Donovan said.
The investment income balance would have the first "clean" read in a year with no distortions from banks' tax liabilities.
One major point of uncertainty was the profits of overseas-owned firms - with the exception of banks, which could be traced accurately. Profits of those firms were stronger than expected in December, almost back to their pre-recession highs.
Mr O'Donovan said that markets appeared to be less focused on New Zealand's deficit now it was no longer cringe-making.
On Thursday, GDP data would be released and that was again expected to show good news for the Government.
ASB chief economist Nick Tuffley expects GDP - a measure of the output produced in an economy during a set period - to have increased 0.5% in the three months ended March.
Another increase would mark the fourth quarter of economic expansion following 15 months of recession which resulted in GDP contracting 3.4%.
"The economic recovery continues to gain traction and become more broad-based. In particular, we expect this quarter's growth to be driven by further recovery in those areas most impaired during the recession: manufacturing; wholesale and retail trade; transport, storage and communication."
There were likely to be some pockets of weakness. The drought in Northland was expected to weigh on total dairy production and renewed weakness in the housing market would affect financial services.
The recovery in GDP growth was expected to continue to gather momentum during the year, he said.
Export incomes would continue to recover, supported by strength in commodity prices. The improving demand for labour would feed through to stronger wage growth. Along with tax cuts, higher wages should buoy consumers' discretionary spending, Mr Tuffley said.
At a glance:-
- Wednesday: Current account deficit: expected to narrow in the year to March.
- Thursday: Economy expected to show fourth consecutive quarter of growth after 15 months of recession.
