Import growth widens current account deficit

The seasonally adjusted current account deficit widened to $4.8 billion in the September 2021 quarter, due to growth in imports, Stats NZ said today.

The current account deficit was $1.7 billion wider than the previous quarter mainly due to an increase in the value of goods imports (up $1.8 billion) and services imports (up $123 million).

Goods exports increased $209 million, while services exports decreased $114 million.

Imports of goods continue to rise, while value of exports rise more slowly

In the September 2021 quarter, seasonally adjusted goods imports rose by $1.8 billion to $18.1 billion, a new high for the series. This was attributed to both an increase in the volume of goods imports (up 3.4 percent) and price of goods imports (up 3.8 percent).

"The value of seasonally adjusted goods imports has continued to rise since falling sharply in the June 2020 quarter during the alert level 4 COVID-19 lockdown. Imports of fertilisers, crude oil, and vaccines were the main drivers of the overall rise in goods imports this quarter," institutional sectors senior manager Paul Pascoe said.

In the September 2021 quarter, seasonally adjusted goods exports rose by $209 million to $16.2 billion. A rise in the export of meat and wine was almost offset by a fall in the export of logs.

"While the value of goods exports is back above levels seen prior to COVID-19, it has grown more slowly than imports in the last year," Mr Pascoe said.

Overall, the goods deficit was $1.9 billion in the September 2021 quarter.

Services deficit widens

In the September 2021 quarter, New Zealand had a seasonally adjusted services deficit of $749 million, compared with a services deficit of $512 million in the June 2021 quarter.

Seasonally adjusted transport services imports rose by $254m to $1.3 billion in the September 2021 quarter. Since the June 2020 quarter, transport services imports were the main contributor to the increase in total services imports.

"Transport services imports have almost doubled in value since the June 2020 quarter when New Zealand was in an alert level 4 lockdown. They are now similar to the pre-COVID level of $1.2 billion in the December 2019 quarter," Mr Pascoe said.

Transport services include freight and passenger airfares.

Overall, seasonally adjusted services imports rose by $123 million to $4.8 billion in the September 2021 quarter.

By comparison, seasonally adjusted travel services exports fell by $99 million, influenced by the suspension of the travel bubble between New Zealand and Australia on 23 July 2021.

Following the border restrictions introduced in the March 2020 quarter, travel services exports remained at less than half the pre-COVID level.

Travel services exports includes expenditure by overseas visitors to New Zealand.

Overall, seasonally adjusted services exports fell $114 million to $4.1 billion in the September 2021 quarter.

Annual current account deficit widens

The annual current account deficit was $15.9 billion in the year ended 30 September 2021. As a ratio of GDP, it was 4.6 percent of GDP.

The largest annual current account deficit prior to this was $14.7 billion in the December 2008 year when we saw the impact of the 2007-2009 global financial crisis. The 2008 deficit was equivalent to 7.8 percent of GDP.

Net international investment position widens

At 30 September 2021, New Zealand had a net liability position of $163.9 billion (47.7 percent of GDP), $9.1 billion wider than on 30 June 2021.

This was mainly due to a net $9.0 billion of transactions reducing offshore assets and a net $0.3 billion of transactions increasing offshore liabilities.

For the September 2021 quarter, the current account deficit was primarily financed by reducing offshore assets.

The reduction in offshore assets resulted from activities of fund managers and banks reducing offshore debt securities, and New Zealand businesses reducing their investment in offshore businesses.

The net $0.3 billion increase in liabilities resulted from activities that both increased and decreased New Zealand offshore financial liabilities. These activities included foreign investors buying a net $5.6 billion of New Zealand government securities. This increased the New Zealand government's offshore debt, following the Reserve Bank of New Zealand halting purchases of New Zealand government debt securities using its Large-Scale Asset Purchases programme.

The effect of changes in exchange rates and share prices was smaller this quarter, compared with recent quarters.