Record imports push current account deficit to 9-year high

Record imports push current account deficit to 9-year high

20 June 2018

New Zealand’s seasonally adjusted current account deficit for the March 2018 quarter was $3 billion, Stats NZ said today.

This was the largest current account deficit since the 2008 global financial crisis and was due to a drop in exports and record high imports. The current account deficit was 2.8 percent of gross domestic product (GDP) in the March 2018 year, compared with the 7.8 percent peak in 2008.

The current account balance records the value of New Zealand’s transactions with the rest of the world in goods, services, and income. It is an important indicator of the economy’s health. New Zealand has a current account deficit when we spend more than we earn from our transactions with the rest of the world.

International trade pushes seasonally adjusted quarterly changes

The goods deficit widened to $1.7 billion in the March 2018 quarter, due to strong imports of petroleum and machinery and equipment (such as tractors).

“We had a record value of imported goods this quarter, which continued a trend of rising imports,” international statistics senior manager Peter Dolan said.

“The price of imported crude oil rose 10 percent and the volume increased more than 5 percent. Imports increased over a range of commodities, which included tractors.”

Overseas trade indexes: March 2018 quarter has more information.

New Zealand’s exports of goods fell 5.9 percent from the December 2017 quarter’s record high, but they remained at a high level. Lower dairy prices and a fall in the volume of meat exports contributed to the drop.

The quarterly changes to the current account deficit over recent years have been driven by changes in the value of our exports and imports.

“New Zealanders buying and selling goods with the rest of the world is mainly responsible for the quarterly changes to the current account,” Mr Dolan said.

Current account deficit as a percentage of GDP increases

For the year ended March 2018, the current account deficit was 2.8 percent of GDP, at $7.9 billion. This is larger than the March 2017 year’s deficit of 2.6 percent of GDP. The current account to GDP ratio can be used to compare our net spending with the rest of the world, to indicate the health of the economy.

"The United States and Australia have current account deficits of 2.6 percent and 2.3 percent of GDP, respectively, making our spending with the rest of the world a similar proportion as these countries. China has a surplus," Mr Dolan said.

Video

View our Explaining the balance of payments video.

Authorised by Liz MacPherson, Government Statistician, 20 June 2018.

For more information about these statistics:

• Visit Balance of payments and international investment position: March 2018 quarter

• See CSV files for download

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