Balance of Payments and International Investment
Position: June 2004 quarter 23 September 2004
Current Account Deficit Widens
The seasonally adjusted Balance of Payments current account deficit increased by $554 million in the June 2004 quarter
to record a deficit of $2,074 million, according to Statistics New Zealand. This widening deficit follows a $295 million
increase in the deficit from the December 2003 quarter to the March 2004 quarter. The deficit represents the difference
between New Zealand's total overseas earnings and payments during the quarter.
Rising imports of goods and higher income payments to foreign investors were the main contributors to the increase in
the current account deficit this quarter. These changes were partly offset by: increased returns from exports of goods;
increased expenditure by foreign tourists in New Zealand; and higher receipts of non-resident withholding tax.
A rise in import prices and higher import volumes contributed to an increase of $872 million in the value of goods
imports in the June 2004 quarter. Import prices for merchandise rose 5.0 percent, driven by the depreciation of the New
Zealand dollar and rising petroleum and petroleum product prices.
Higher volumes of intermediate goods (goods imported for further processing in New Zealand), consumption goods,
passenger motor cars and motor spirit were the main contributors to the increase in imports. Goods export prices and
volumes rose by 7.2 percent and 1.7 percent, respectively, in the June 2004 quarter. Export prices increased due to the
depreciating New Zealand dollar and rising world commodity prices for New Zealand's main export commodities.
The combined effect of higher prices and volumes was to increase the value of June 2004 quarter goods exports by $560
million.
The number of overseas visitors to New Zealand rose by a seasonally adjusted 6.7 percent in the June 2004 quarter,
compared with the March 2004 quarter. This rise in visitor numbers combined with higher overseas visitor spending to
drive a $208 million increase in tourism receipts. Higher tax receipts for the New Zealand Government from non-resident
withholding tax reflected higher income payments to overseas investors.
The current account balance for the year ended June 2004 was a deficit of $6,435 million, and is 4.6 percent of Gross
Domestic Product (GDP). This compares with a March 2004 year ended deficit of $6,022 million (4.4 percent of GDP), and a
June 2003 year ended deficit of $5,239 million (4.0 percent of GDP). At 30 June 2004, New Zealand's net international
debtor position was $109.2 billion (foreign investment in New Zealand exceeds New Zealand investment abroad). This net
debtor position was $0.8 billion (0.7 percent) larger than the position at 31 March 2004, and $7.0 billion (6.9 percent)
larger than the position at 30 June 2003.
Compared with 31 March 2004, the 30 June 2004 value of New Zealand's international investment fell by $5.3 billion (6.2
percent). The main cause of this fall was net transactions of $3.3 billion reducing New Zealand's official overseas
reserve assets. At 30 June 2004, these assets were $7.3 billion. The 30 June 2004 value of foreign investment in New
Zealand fell by $4.6 billion (2.4 percent), compared with 31 March 2004.
This fall featured a net inflow of foreign direct investment of $1.8 billion, which was more than offset by a net $5.7
billion withdrawal of foreign portfolio and other investment. The key component of the net inflow of foreign direct
investment in New Zealand was borrowing by New Zealand banks and corporates from their overseas parents. The key factors
in the withdrawal from New Zealand of foreign portfolio and other investment were lower foreign holdings of New Zealand
Government and private sector bonds, and New Zealand banks reducing their loans from abroad.
Brian Pink Government Statistician
ENDS