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Balance of Payments

The current account deficit stood at 4.3% of GDP for the twelve months to September 2011. 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, as investment income outflows rose due to an increase in international liabilities, resulting in a widening current account deficit over the period. After late 2008, the investment income deficit narrowed markedly, driven by lower profits accruing to overseas-owned firms operating in New Zealand as a result of weak domestic trading conditions, and lower interest payments flowing to holders of New Zealand debt as the result of lower interest rates both domestically and internationally. In the year to September 2011 the deficit started to widen again.

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 8.7% of nominal GDP in the year ended 30 September 2008.

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 to 3.0% of GDP in the year ended September 2009. The deficit increased to 4.3% of GDP in the year ended September 2011 as a rise in the income deficit, driven by an increase in profits to foreign investors in New Zealand firms, more than offset an increase in the goods surplus, as well as a return to a services 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.

Table 17 - Balance of Payments
2007 2008 2009 2010 2011
Year ended 30 September (dollar amounts in millions)

Current Account

Export receipts 35,111 42,728 42,441 42,297 47,515
Import receipts 38,328 45,195 40,328 39,057 44,470
Merchandise balance (3,218) (2,467) 2,115 3,241 3,045
Services balance 522 (274) (160) 1 (1,077)
Investment income balance (12,786) (13,997) (7,898) (9,750) (10,213)
Transfers balance 645 885 463 25 (329)
Current account balance (14,923) (15,972) (5,629) (6,621) (8,675)
Deficit as % of GDP (8.5) (8.7) (3.0) (3.5) (4.3)

Financial Account (net)

Foreign investment in NZ 29,173 14,553 (7,124) 12,715 17,925
NZ investment abroad 17,521 (702) (1,816) 11,948 17,261
Reserves 3,967 1,371 10,454 2,309 (1,766)
Financial account balance 11,652 15,255 (5,308) 767 664

Capital Account

Balance of Capital Account (696) (654) 481 3,543 9,777

Source: Statistics New Zealand

Figure 5 - Balance of Payments
Source: Statistics New Zealand.
Source:  Statistics New Zealand
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