N.Z. Annual Current-Account Gap Narrows as Foreigners Earn Less

New Zealand’s annual current-account deficit narrowed in the year through September as earnings by foreign-owned companies and banks declined, offsetting a rise in imports and increased overseas travel.

The shortfall was 4.7 percent of gross domestic product in the year ended Sept. 30 compared with a revised 4.8 percent in the 12 months through June, Statistics New Zealand said in Wellington today. The gap was smaller than the 4.8 percent median forecast in a Bloomberg News survey of nine economists.

The deficit, the broadest measure of trade because it includes goods, investment income and services such as tourism, has widened the past two years as a stronger currency encourages residents to travel overseas and curbs exports. The shortfall, one factor ratings companies such as Standard & Poor’s use to assess the country’s capacity to meet it obligations, may grow as a recovery and rebuilding of earthquake-damaged Christchurch city stokes demand for imports.

“The nation’s external accounts will expand to an uncomfortable degree over the next couple of years,” Craig Ebert, senior economist at Bank of New Zealand Ltd. in Wellington, said ahead of the report. “As the deficit heads above 6 percent by the end of next year, it will receive increasing focus from markets and rating agencies.”

New Zealand’s dollar was little changed after the report, trading at 84.14 U.S. cents as of 11 a.m. in Wellington. It has gained 8.3 percent this year, the best performing Group of 10 currency.

Annual Shortfall

The annual current-account shortfall narrowed to NZ$9.89 billion ($8.3 billion) from NZ$10.09 billion in the year through June, today’s report showed.

The annual deficit on income, a measure of international investment income and compensation for employees, was the smallest since the second quarter of last year as earnings by foreign-owned companies and banks declined, and New Zealand investors earned more overseas, the statistics agency said.

The annual trade surplus was the smallest since the second quarter of 2009 as fuel imports rose, outpacing a third-quarter jump in dairy exports. Spending on overseas travel by New Zealanders and higher reinsurance premiums paid by local insurers led to a wider services deficit.

New Zealand’s Treasury Department yesterday estimated the current-account deficit would widen to 6.5 percent of GDP by March 2017, led by imports to rebuild Christchurch. Ebert forecasts a 6.8 percent gap by the end of 2013.

The third-quarter deficit widened to NZ$4.42 billion from NZ$1.8 billion in the three months through June. Economists predicted the quarterly gap would be NZ$4.4 billion.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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