Dec 20, 2017  - New Zealand's seasonally adjusted current account deficit for the September 2017 quarter narrowed to $1.3 billion, Stats NZ said today. This is $183 million smaller than the June quarter's deficit and was driven by a fall in imported goods.

The current account balance records the value of New Zealand’s transactions with the rest of the world in goods, services, and income. When we have a current account deficit, it implies foreigners earn more from New Zealand than we earn from overseas economies. It is an important measure of the health of the economy.

Goods deficit smallest since June 2014

The shortfall between the value of exports and imports in the September quarter was much smaller than in the June quarter – the seasonally adjusted goods deficit was $26 million, down from the June quarter’s $437 million deficit and the smallest since the June 2014 quarter.

In the June 2017 quarter, the goods imports recorded its highest level – driven by imported vehicles. This was offset by strong exports in dairy products. In the September 2017 quarter, imports of goods fell $470 million while exports of goods fell $58 million.

"Although we still imported a larger value of goods than we exported, it is the reduction in imports that caused the smaller deficit this quarter compared with last quarter," international manager Daria Kwon said.

"Our terms of trade also reached an all-time high in the latest quarter with import prices falling more than export prices".

Overseas merchandise trade: September 2017 has more detail.

The seasonally adjusted services surplus was a steady $1.2 billion for the September 2017 quarter, $91 million narrower than for the June 2017 quarter. The seasonally adjusted goods and services surplus increased to $1.2 billion in the latest quarter – up from a surplus of $840 million in the June 2017 quarter.

Income deficit increases

The primary and secondary income balance measures the income on investments, in and out of the country, that foreign investors make in New Zealand and that Kiwis make overseas. It also includes transfers (goods, services, or money) between New Zealand and the rest of the world.

The combined primary and secondary income deficit increased $136 million in the September 2017 quarter – up to $2.5 billion.

The primary income net outflow increased $312 million in the September 2017 quarter, to reach $2.4 billion. New Zealand businesses earned less income from their overseas subsidiaries this quarter, while the income earned by foreign-owned businesses was relatively steady.

Secondary income net outflow decreased $175 million – down to $85 million in the September 2017 quarter, partly offsetting the increase in the primary income deficit. New Zealand's outflow of secondary income consists of transactions where we do not receive a financial benefit in return, mainly from foreign aid.

Annual current account deficit same level as 2016

The current account deficit for the year ended September 2017 was $7.1 billion, the same level as for the year ended September 2016. A $659 million increase in the primary income deficit was the main driver behind the current account deficit, but this was partly offset by a $378 million increase to the goods and services surplus.

For the year ended September 2017 the current account deficit as a ratio of GDP was 2.6 percent. It was 2.7 percent of GDP for the year ended September 2016. The annual current account deficit has remained between 2 and 4 percent of GDP since 2010.

| A STATSNZ release  ||  December 20, 2017   |||