21 September 2006
Goods and Services Improve Current Account Deficit
The seasonally adjusted current account deficit was $3,524 million in the June 2006 quarter, $642 million narrower than
the March 2006 quarter deficit, Statistics New Zealand said today. The smaller deficit this quarter was due to an
increase in the value of goods exported, combined with an increase in expenditure by visitors to New Zealand. These
factors were partly offset by an increase in income earned from foreign investment in New Zealand.
Seasonally adjusted exports of goods increased to $8,856 million in the June 2006 quarter, with both prices and volumes
contributing to the increase. Export prices of goods rose 8.0 percent, while the largest increases in export volumes
were for dairy products and meat. Exports of services rose to $3,139 million this quarter, mainly due to an increase in
spending by overseas visitors to New Zealand.
In the June 2006 quarter, New Zealand’s investment income deficit rose to $3,240 million. A $297 million rise in income
earned by foreign investors from their investments in New Zealand was partly offset by a $164 million increase in income
from New Zealand investment abroad. Income from foreign investment in New Zealand increased due to higher profits from
foreign-owned New Zealand companies and interest paid on New Zealand’s overseas debt. In the June 2006 quarter,
foreign-owned companies mostly chose to pay out profits as dividends rather than retain earnings within their
subsidiaries.
The year ended June 2006 current account deficit was $15.2 billion, $3.1 billion wider than for the year ended June
2005. This widening is mostly due to a $1.9 billion rise in the investment income deficit, resulting from a fall in
income earned from New Zealand investment abroad, combined with an increase in income earned by foreign investors from
their New Zealand investment.
New Zealand’s current account deficit is financed by either increasing foreign liabilities, reducing foreign assets, or
a combination of both. In the June 2006 quarter, New Zealand’s current account deficit was financed by a $2.3 billion
net inflow of capital, primarily due to reducing New Zealand’s foreign assets.
Geoff Bascand Acting Government Statistician
ENDS