NZ: Q1 current account widens to 3.1% of GDP – Westpac

New Zealand’s current account deficit widened to 3.1% of GDP in the year to March, notes Michael Gordon, Acting Chief Economist at Westpac.

Key Quotes

“New Zealand’s current account deficit widened to 3.1% of GDP in the year to March, compared to an upwardly revised deficit of 2.8% in December. This result was in contrast to market expectations of an unchanged deficit, but was close to our forecast of -3.0%.”

 “The increase in the deficit reflected temporary weakness in export volumes, stronger spending by New Zealanders overseas, and stronger profits for over seasowned firms in New Zealand.”

“The widening of the deficit was due to a combination of factors, none of which were particular cause for alarm. The current account deficit is effectively back to where it was a year ago, and it remains remarkably low compared to history. New Zealand’s net international liability position continues to shrink, and as a share of GDP is at its smallest in decades.”

 “A string of modest current account deficits has led to a marked improvement in New Zealand’s external debt position in recent years.”

“Today’s data has no implications for tomorrow’s March quarter GDP report, where we expect a 0.8% increase. The only surprise relative to our forecasts was a larger investment income deficit, which doesn’t enter the activity data.”