NZ: Current account deficit to widen to 3.6% of GDP - Westpac

Michael Gordon, Senior Economist at Westpac, expects New Zealand’s annual current account deficit to widen from 3.3% to 3.6% of GDP even as the quarterly balance for September should see some improvement compared to June.

Key Quotes

“To some extent, the current account deficit follows the economic cycle: when the economy is strong, demand for imports rises and the outflows of interest and profit increase. However, temporary factors have also played a part. Milk production has been lower and oil prices have risen over the past few years, but these are set to reverse course. The current account remains on a path that we’d consider to be sustainable over the long term.”

“In seasonally adjusted terms, the goods trade deficit narrowed to around $900m in the September quarter, with a strong lift in export volumes and a drop in import volumes. However, the improvement in the goods balance was largely offset by a fall in the services surplus, as tourist spending reversed its June quarter gains. We expect little change in the investment income deficit, with profits of overseas-owned firms and interest paid on overseas debt relatively flat over the past year.”