National deficit drops to lowest figures since March 2022

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Photo: RNZ / Diego Opatowski

The nation’s current account deficit has narrowed markedly as stronger tourism and exports boosted income, but the country continues to live well beyond its means.

Stats NZ data showed the deficit for the three months ended June falling $1 billion to $4.2b, and the annual deficit decreased to $29.8b, the lowest in a year.

The deficit equated to 7.5 percent of the value of the economy, the lowest since March 2022.

On the goods side imports rose $8.4b to $85.8b for the year, outpacing exports which grew by $5.5b to $73.3b.

“Fuel, including diesel, petrol, and jet fuel, was the main contributor to the increase in goods imports, driven by increases in both the price and volume of fuel,” Stats NZ senior manager Paul Pascoe said.

However, for the services side of the economy the growth in exports, such as tourism, outpaced imports.

“Overseas visitors increased their spending almost twice as much as New Zealanders increased their spending overseas,” Pascoe said.

Overseas investors also earned more from their New Zealand investments, driven by higher local interest rates.

The gap between New Zealand’s overseas financial assets and liabilities was little changed at $189.3b or 47.8 percent of the value of the economy.

The data was better than expected by analysts, but reaffirmed New Zealand needed to borrow to pay its bills.

Credit rating agencies have warned about the size of the current account deficit and the high level of foreign debt, but have said as long as the deficits fall the country’s top level ratings are not under threat.