The deficit between what we get from our exports and what we spend on imports has, on an annual basis, grown to its highest ever level.
Statistics New Zealand reported that our annual current account deficit to September was 7.9% of GDP, which beat the previous high of 7.8% recorded during the Global Financial Crisis in December 2008.
In dollar terms, the deficit between import spending and export receipts was some $29.7 billion, up by $13.3 billion from the year-ago figure.
In dollar terms the deficit is way higher than seen previously. For example that previous high of deficit to GDP from 2008 related to a dollar deficit of just $14.7 billion.
Big as Wednesday's deficit is though, it is actually probably slightly lower than economists expected - with expectations of around 8%. And economists do believe that the deficit will start to narrow again in future, with the re-opening of our borders bringing tourist dollars in, while Kiwis are expected to reduce spending in the face of the increasing interest rates.
Total imports of goods and services for the year ended 30 September 2022 were $104.6 billion, an increase of $21.5 billion from the year ended 30 September 2021.
Total exports of goods and services in the year ended 30 September 2022 were $86.5 billion, an $11.3 billion increase from the year ended 30 September 2021.
Stats NZ's institutional sectors senior manager Paul Pascoe said the widening in the annual current account deficit was mainly due to a $10.2 billion widening in the goods and services deficit.
"A current account deficit reflects that we are spending more than we are earning overseas. The size of the current account balance in relation to GDP shows its significance in the context of New Zealand’s overall economy," Pascoe said.
This rise in goods imports was mainly driven by petrol, diesel and aviation gas, and machinery equipment.
"Rising prices for some imported commodities like petrol, a falling exchange rate, and higher shipping costs all contributed to the annual increase in imports," Pascoe said.
"Dairy and meat were the key drivers for the increase in goods exports, with dairy prices continuing to rise in the year ended 30 September 2022," he said.
New Zealand’s net international liability position was $193.7 billion (51.9% of GDP) as at September 2022, which was $11.0 billion (or 6%) wider than at June 2022. Looking at the detail of that - New Zealand’s international assets were $356.1 billion as of September, which was $12.1 billion larger than at June 2022, while international liabilities were $549.8 billion, some $23.1 billion larger than at June 2022.
The net international investment position represents the difference between New Zealand’s financial assets and liabilities with the rest of the world. New Zealand has a net liability position as we have more liabilities with the rest of the world than we do assets.
In terms of just the quarterly figures, the seasonally adjusted current account deficit narrowed by $1.3 billion to $5.9 billion in the September 2022 quarter, from $7.3 billion in the June 2022 quarter.
Westpac acting chief economist Michael Gordon said the current account deficit is "a symptom of the overheating in the domestic economy".
"We are, for now, living beyond our means – we have not adjusted our spending patterns to either the loss of export income or the cost-induced surge in our import bill."
But he says next year will be a different.
"Visitor numbers should continue to pick up from here, judging by the trends in Northern Hemisphere travel. And more importantly, the conditions for a slowdown in domestic spending are already in place. Households with a mortgage will be rolling onto substantially higher interest rates in the coming months, which will inevitably eat into discretionary spending.
"As a result, we expect the deficit to narrow from here on, returning to a more sustainable level of around 3-4% in 2024."
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