Imports Widen Current Account Deficit

Embargoed until 10:45am – 22 June 2006

Imports Widen Current Account Deficit

The seasonally adjusted current account deficit was $4,101 million in the March 2006 quarter, Statistics New Zealand said today. The $665 million widening of the current account deficit this quarter was mainly due to an increase in goods and services imported, combined with a wider investment income deficit.

The value of imports of goods rose $396 million from the December 2005 quarter to the March 2006 quarter, with import prices and volumes both contributing to the increase. The price of petroleum products rose again this quarter, and has now risen in eight of the last nine quarters. Imports of services also increased this quarter, due to higher expenditure by New Zealanders travelling abroad, and higher freight payments on imports of goods. The wider investment income deficit in the March 2006 quarter was due to higher income payments to foreigners for their investments in New Zealand, combined with lower earnings from New Zealand's investments abroad.

The year-ended March 2006 current account deficit was $14.5 billion (9.3 percent of GDP). This compares with a deficit of $13.7 billion (8.9 percent of GDP) for the year ended December 2005, and $11.1 billion (7.4 percent of GDP) for the year ended March 2005.

The current account deficit for the March 2006 quarter was financed by $7.9 billion of foreign investment into New Zealand during the quarter exceeding $5.8 billion of New Zealand’s investment abroad. This resulted in a $2.1 billion net inflow of capital into New Zealand during the quarter. The New Zealand banking sector was the most significant contributor to these investment transactions.

Over the past year, New Zealand net liabilities have risen as a result of the need to finance continuing current account deficits. Measured on a balance sheet basis, the net liability position was $132.9 billion at 31 March 2006, $6.8 billion (5.3 percent) larger than the position at 31 March 2005.

Geoff Bascand

Acting Government Statistician

ENDS

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