Annual National Accounts Show Buoyant Economy
Gross domestic product (GDP) in current prices rose 7.4 percent for the year ended March 2002, according to the annual
national accounts released today by Statistics New Zealand. This follows a 6.3 percent increase in the previous March
year. Unlike the regularly produced quarterly gross domestic product (GDP) series, these statistics make no adjustment
for the effects of price changes. When the effects of inflation are removed, there was an increase of 3.3 percent in
constant price GDP for the March 2002 year.
Economic growth in the latest March year has been driven by both exports, up 5.5 percent, and internal demand, up 6.0
percent. Household and government spending were both up, and capital investment recorded a lift of 8.8 percent.
The two key components of national income, compensation of employees and business operating surplus, again recorded
strong growth, up 7.8 percent and 7.7 percent respectively. This latest increase in operating surplus was influenced by
activity in the primary sector. Profitability was maintained in agriculture and the related primary product
manufacturing industries, with increased income from dairy, meat and horticultural products. Despite the buoyant
domestic economy, there was a fall in net investment income paid to the rest of the world, down from $7,826 million in
2001 to $6,701 million in the March 2002 year. The fall reflects a drop in investment income payments overseas (down 8.6
percent) and a lift in investment income receipts (up 16.3 percent).
As a result, national disposable income rose faster than GDP, increasing 9.2 percent in the March 2002 year, up on the
5.2 percent recorded in the previous year.
National disposable income is available for either current consumption expenditure or saving.
Household consumption expenditure increased by 4.9 percent for the year ending March 2002, following a rise of 4.3
percent in the previous year. This increase in expenditure reflects rising household incomes due to increased employment
levels and higher earnings for paid employees and the self-employed. Central government consumption expenditure
increased 7.0 percent, or $1,263 million, during the March 2002 year.
Despite the rise in consumption expenditure, the large increase in national disposable income resulted in a sharp lift
in national saving, up from $2,174 million to $5,892 million (or from 2.4 percent of national disposable income to 5.9
percent). This is the highest national saving ratio recorded since 1989 when saving was also 5.9 percent of national
With business confidence remaining high during most of the year, investment increased.
Expenditure on fixed assets rose 7.4 percent and there was an inventory build-up of $1.8 billion, mainly in the
wholesale industry. With domestic saving at a high level, much of the increase in investment was financed internally,
and borrowing from the rest of the world fell significantly.
In the external account there was a marked reduction in the external current account deficit. The combined effect of a
lift in export earnings – from both merchandise exports and tourism – and the fall in net investment income payments to
the rest of the world, resulted in the current account deficit reducing from $5,284 million in 2001 (4.6 percent of GDP)
to $2,593 million (2.1 percent of GDP) in the latest year. When coupled with a marked turnaround in the balance of
capital transfers, recording a surplus after three years in deficit, net borrowing from the rest of the world fell from
$5,468 million to a low of $1,204 million.