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Balance of Payments

The current account deficit stood at 3.1% of GDP for the twelve months to September 2009 but had fluctuated in a range of 4.8% to 9.3% of GDP over the previous five years. A key feature of New Zealand's current account deficit is the large deficit on investment income, reflecting New Zealand's net foreign liability position.

The investment income deficit increased between June 2004 and June 2008, resulting in a widening current account deficit over the same period. Since late 2008, the investment income deficit has narrowed markedly, driven by lower profits accruing to overseas-owned firms operating in New Zealand as a result of weak domestic trading conditions.

The goods and services balance has varied due to the effects of drought, commodity price fluctuations, including oil price changes, some large one-off imports and currency movements, as well as New Zealand's demand for imports and international demand for New Zealand exports. The impact of the stronger currency on export earnings and strong domestic growth on import demand, together with an increase in the investment income deficit due to strong profits of foreign-owned firms, led to the current account deficit reaching 9.3% of nominal GDP in the year to 30 September 2006.

More recently, however, the combination of narrowing goods and services deficits and, in particular, a shrinking investment income deficit, led to the current account deficit falling from 8.7% of GDP in December 2008 to 3.1% of GDP in September 2009. The annual deficit is expected to have narrowed to 2.8% by the end of 2009, reflecting a further shrinking of the investment income deficit and exports growing stronger than imports. From 2010, the current account deficit is expected to widen as the pick-up in domestic demand flows through to stronger imports, while increased earnings for overseas-owned firms result in a deteriorating investment income deficit.

Balance of payments statistics are compiled by the Government following principles set out by the IMF in the 5th edition of the Balance of Payments Manual.

Balance of Payments
(dollars amounts in millions)
Year ended 31 March
2005 2006 2007 2008(1) 2009(1)
Current Account
   Export receipts 31,114 31,581 35,636 38,720 44,259
   Import receipts 33,343 35,685 38,464 40,515 45,594
   Merchandise balance (2,228) (4,104) (2,828) (1,796) (1,337)
   Services balance 1,200 522 433 184 (1,119)
   Investment income balance (9,384) (11,065) (11,906) (13,343) (13,035)
   Transfers balance 293 144 774 828 919
Current account balance (10,120) (14,504) (13,527) (14,128) (14,568)
    Deficit as % of GDP (6.7) (9.0) (8.0) (7.8) (7.9)
Financial Account (net)
   Foreign investment in NZ  13,870 10,421 23,370 26,795 (8,853)
   NZ investment abroad 3,222 (3,790) 11,120 12,500 (16,122)
   Reserves (914) 4,850 6,744 5,763 (9,947)
   Financial account balance 10,648 14,211 12,250 14,295 7,269
Capital Account
   Balance of Capital Account 108 (326) (457) (773) (579)

(1) Provisional.

Balance of Payments
Balance of Payments
Sources:  Statistics New Zealand
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