Current account deficit up $0.6 billion

New Zealand's seasonally adjusted current account deficit grew to $1.8 billion in the June 2010 quarter, Statistics New Zealand said today. The deficit is $0.6 billion larger compared with the previous quarter, and is mainly due to a rise in the income deficit, combined with lower taxes received from foreign investors.

"Foreign-owned New Zealand companies earned higher profits this quarter, driving the rise in the income deficit," balance of payments manager John Morris said. Foreign investors also earned more from their other shareholdings and lending in New Zealand.

Taxes received from foreign investors were lower this quarter after a policy change on non-resident withholding tax. This policy was introduced by Inland Revenue in February 2010.

Another factor increasing New Zealand's deficit with the rest of the world this quarter was a fall in spending by visitors to New Zealand. Visitor numbers were down, along with spending per person.

Meanwhile, rising prices for New Zealand goods overseas increased goods exports, which drove the goods surplus to $1.2 billion – the largest surplus since the series began in 1987. The quarterly goods figures reflect the continuing impact of rising prices for New Zealand's dairy exports.

The current account deficit for the year ended June 2010 was $5.6 billion (3.0 percent of GDP), down from $10.5 billion (5.7 percent of GDP) a year ago. Imports of goods (mainly non-food manufactures) fell $5.5 billion over this time.

At 30 June 2010 New Zealand's net international liabilities were $163.7 billion (86.5 percent of GDP), $2.7 billion larger than at 31 March 2010. The increase was caused by net foreign investment inflows of $1.3 billion, combined with falls in overseas sharemarkets. A fall in overseas sharemarkets where New Zealand funds are invested decreases the value of our overseas assets.

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