Further widening of New Zealand's current account deficit can be expected in coming quarters as the full impact of higher costs for imported energy and related products feeds into the data, Westpac said in a Wednesday report.
New Zealand recorded a seasonally adjusted current account deficit of NZ$3.8 billion in the June quarter, narrowing NZ$666 million from the previous quarter. The current account deficit widened to 3.2% of GDP in the year to June, in line with expectations.
For the second year in a row, the release of balance of payments data for the June quarter contained historical revisions to estimates of the current account deficit. The deficit for the year to March is now estimated at 3% of the gross domestic product (GDP), rather than the 3.6% of GDP deficit that was estimated previously.
The key revisions concerned primary income flows, with new estimates pointing to higher returns earned on New Zealand's investment abroad and lower returns paid on foreign investments in New Zealand.
The revisions have no implications for the bank's estimate of June quarter GDP growth, which remains 0.2%.
New Zealand's international investment position improved in the June quarter, reflecting favorable changes to offshore asset valuations, falling to NZ$178.3 billion, or 39% of GDP, from NZ$191.7 billion, or 42.5% of GDP, in the March quarter. The liability is mostly related to debt, with net external debt reaching 49.4% of GDP in the June quarter.
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