23 March 2005
Balance of Payments and International Investment
Position: December 2004 quarter
Year-ended Current Account Deficit Continues to Widen
The seasonally adjusted current account balance was a deficit of $2,513 million in the December 2004 quarter, according
to Statistics New Zealand. This is $442 million lower than the September 2004 quarter deficit of $2,955 million. On a
year-ended basis, the deficit continued to widen and reached $9,385 million (6.4 percent of Gross Domestic Product
(GDP)), compared with $5,630 million for the year ended December 2003 (4.2 percent of GDP). The current account deficit
represents the net value of New Zealand's international transactions in goods, services, income and current transfers.
The main factors contributing to the wider year-ended current account deficit were: an increase in income payable to
foreign investors in New Zealand due to higher reported profits; and an increase in the imports of goods.
The main factors contributing to the narrower current account deficit this quarter were: an increase in receipts from
goods exports; an increase in earnings from New Zealand investment abroad; and a fall in income payments to foreign
investors in New Zealand. Partly offsetting these factors was an increase in imports of goods.
The net inflow of foreign investment into New Zealand was $5.5 billion in the December 2004 quarter. The main
contributors to this net inflow were increases in foreign borrowing by New Zealand banks, the New Zealand Government and
by the private sector. Part of the increased bank borrowing from abroad was used to fund mortgage lending in New
Zealand. The increase in foreign holdings of New Zealand debt securities is due to attractive returns to investors.
New Zealand's current account deficit is financed by inflows of investment from abroad, recorded in the financial
account. New Zealand has recorded persistent current account deficits, and this has resulted in a level of foreign
investment in New Zealand that exceeds New Zealand's investment abroad –a net debtor position.
New Zealand's net debtor position was $123.5 billion at 31 December 2004, an increase of $17.4 billion compared with 31
December 2003. The December 2004 net debtor position comprises net international debt (lending to overseas less
borrowing from overseas) of negative $94.5 billion, and net equity (New Zealand ownership of overseas company shares
less foreign ownership of New Zealand company shares) of negative $29.0 billion.
The main growth in New Zealand's net debtor position has been from a rise in the net international debt position to
$94.5 billion (64.6 percent of GDP) at 31 December 2004, from $80.4 billion (59.6 percent of GDP) at 31 December 2003.
Of this rise, $10.8 billion (76.6 percent) could be attributed to an increase in the New Zealand banking sector's net
international debt.
Brian Pink
Government Statistician
ENDS