Balance of Payments
The annual current account deficit was 4.1% of GDP in the year ended September 2013.
Following the GFC, the combination of a rapid turnaround in the goods balance and a shrinking investment income deficit, led to the current account deficit to fall to 1.4% of GDP in the year ended March 2010. In 2011 and 2012 the deficit widened again, owing to a widening in the annual income deficit and a narrower goods and services surplus (driven by falling commodity prices and an appreciating exchange rate).
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 which stood at -69.5% of GDP in the 2013 September year. 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. Another factor was lower interest payments flowing to holders of New Zealand debt as the result of lower interest rates both domestically and internationally.
In the 2013 September year, lower profits flowed to overseas-owned firms, reducing the income balance deficit and offsetting deteriorations in the goods and service balances. 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.
Balance of Payments
The annual current account deficit was 4.1% of GDP in the year ended September 2013.
Following the GFC, the combination of a rapid turnaround in the goods balance and a shrinking investment income deficit, led to the current account deficit to fall to 1.4% of GDP in the year ended March 2010. In 2011 and 2012 the deficit widened again, owing to a widening in the annual income deficit and a narrower goods and services surplus (driven by falling commodity prices and an appreciating exchange rate).
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 which stood at -69.5% of GDP in the 2013 September year. 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. Another factor was lower interest payments flowing to holders of New Zealand debt as the result of lower interest rates both domestically and internationally.
In the 2013 September year, lower profits flowed to overseas-owned firms, reducing the income balance deficit and offsetting deteriorations in the goods and service balances. 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.
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