NZ: Current account deficit to narrow to 2.5% of GDP - Westpac

Michael Gordon, Senior Economist at Westpac, expects the New Zealand’s annual current account deficit to narrow to 2.5% of GDP, from 2.8% in the June quarter. Note that these figures don’t account for the revisions to nominal GDP, which could narrow the deficit further (depending on rounding), he further adds.

Key Quotes

“In seasonally adjusted terms, the goods trade balance moved strongly into surplus in the September quarter. The value of exports was steady, with lower prices but higher volumes. Import prices and volumes were both down for the quarter. Services exports were down in the September quarter as the boost from the Lions tour dropped out. The investment income deficit widened due to higher profits for overseas-owned firms.”

“The improvement in the annual deficit is partly due to base effects. The earlier weakness in dairy export prices and volumes is now dropping out of the calculation, and this effect will play out for a few more quarters. We expect the deficit to narrow to 1.9% of GDP by early next year, which would be the smallest deficit since 2010 – in the wake of the Global Financial Crisis, when import demand had collapsed and interest rates on overseas borrowing had plunged.”