New Zealand’s annual current account deficit last year was $33.8 billion, or 8.9% of gross domestic product — the worst ratio since measurement began in 1988.
The deficit was $12.7 billion wider than in 2021, making the ratio to GDP worse than the previous record of 7.8% during the global financial crisis in 2008.
Statistics New Zealand said a current account deficit shows we are spending more than we are earning overseas, and the ratio to GDP shows its significance to the overall economy.
Miles Workman, a senior economist at ANZ Bank, said New Zealand has persistently run current account deficits of between 3% and 4% of GDP in more normal times.
The services balance turned negative when borders were closed during the pandemic, decimating international tourism and education exports, widening the deficit.
“The outlook is for the current account to narrow as domestic demand softens and international tourism and education exports continue to recover,” he said in a note.
The current account gives an indication of whether or not an economy is ‘living within its means’ and the wide deficit suggests NZ has not been.
Reopened borders and monetary tightening, which will weigh on domestic demand and therefore imports, should mean the deficit should narrow over time and dissuade credit rating agencies from issuing downgrades.
“All up, New Zealand’s external balance suggests inflation isn’t the only reason for monetary tightening to guide the economy towards a more sustainable path.”
“It should also act as a constraint against excess fiscal expansion, showing that while Government debt is relatively low from an international perspective, NZ-wide debt is not,” Workman said.
Drivers driving deficit
The cavernous 2022 account deficit was mainly due to a $10 billion widening of goods and services deficit and $2.7 billion widening of the income deficit.
Paul Pascoe, Stats NZ’s institutional sectors senior manager, said the increase in goods imports was driven by machinery, petrol, and motor vehicles.
Services imports were largely transportation services, business services, and travel services.
“Since New Zealand’s borders opened more New Zealanders have been travelling overseas. The spending on both air transport and travel contributed to the rise in services imports for the year to December 2022”.
Exports of goods and services increased $13.1 billion, with dairy and meat products contributing significantly. The increase in services exports was driven by overseas visitors spending in New Zealand.
The primary income deficit, or the balance of what New Zealanders earn from overseas investments and what overseas investors earn from New Zealand, widened to $11.9 billion.
51 Comments
I think our productive capacity is going into servicing greed, which the Aussie banks are profiting from. Our incompetent authorities are failing at bringing the banks into line, and policymakers have for long allowed a handful of speculators to make easy gains from housing at the expense of the young and vulnerable.
I think our productive capacity is going into servicing greed
Productivity is $ per unit of labour, so any productivity is going to have self interest front and centre.
Productivity isn't about charity and bunny Rabbits. The bulk of your position seems to centre around where the spoils of the greed are heading.
Okay this is starting to do my head in. Do the banks make lots of profit - Yes, is the profit excessive - maybe, are the reasons they are making this excess profit our fault - absolutely.
The banks are making higher profits but not necessarily more margin. The reason they are making higher profits are because Kiwis went on a house spending spree like drunk sailors ie the amount of lending between 2019 and 2021 boomed.
Last year the interest the banks made on that lending was 2.5% now they are getting a minimum of 6% and probably closer to 7%. If the total lending books for the big banks was $10 billion* - then at 2% interest - that was $250 M in interest they were getting - at 6% they are now getting $600M in interest.
Should they be charging less interest - they cant because Adrian Orr needs them to lift interest rates to control inflation - that's called Monetary Policy. Should they pay more on deposits - possibly, but my understanding is the current interest margin between deposits and lending is in line with the long term average in NZ.
The banks job is to lend people money, nobody has to take the money and if you dont they wont make big profits.
*The amount banks have on their loan books is much higher than $10 bllion but its a good number to use for illustrative purposes.
The younger generations will be less likely to want to travel to far reaches of the planet due to their desire to minimise "climate miles". The concept of a 15 minute city will be extended to international travel. Soon it will be considered socially irresponsible to fly any further than 2-3 hours flight time, and holidays will be kept to a geographic minimum. NZ better have a back up plan
Supberb 🤙👏👏
MMP and the voting process allow these skunks to be voted in, then do deals, then bring out hidden socialist agendas.
MMP is useless. It allows minorities to run the policies.
💥All parties should be made to declare all their policies and alliance's before voting day!💥
No hidden Ardern/ Peters deception scenarios...
Ardern was a desperate liar . She lived by the sword and has died by the same sword
Hipkins is now selling his soul to the same sword!.
voting for labour is just dumb and will result in more of the same crap.. just more and smellier!
Not. It's the choices we are forced into by bad / manipulative rules/ policies/ government...
Take house$. .
.if the government was driving a 6% return on your savings along with a capital gains tax ,( not the bright line bullshit) you would not see so much speculation in property
You missed the point. What we got in terms of government rules and regs is exactly what we voted for. CGT, voters made it extremely clear to labour and national in the mid 2010s that it was a no go. Nimbies and speculators have made it quite clear what they think of any land loosening rules.
And that is how we voted, not me, not I and probably not you, but WE did. Democracy is like that.
Millennials are turning 40. I would love for that to still count as 'young' but it's not. Not even close.
I'm guessing you just have a problem with young people in general. I'm sorry that the idea of them getting the same start in life that older New Zealanders did is so upsetting to you. Might be an opportunity for some reflection there.
Wall Street would throw the toys out of the cot if interest rates go any higher. NZ will follow the USA and banks must lend to keep the Ponzi alive. Two options, inflate or bust. But in this crazy banking system perhaps a debt jubilee! Western world governments and banker's want inflation, so inflation it shall be. Spend and lend, spend and lend....
Seen this thrown around a few times lately, I admit I don't know how a debt jubilee would/could/does work. Writing off debt in a liquidation process? Or similar to the way SVB was handled in the uk? Bank sold for a dime, closed, deposits sustained and private debts bought?
A debt jubilee would be awfully unfair to those who do not have debt. Maybe it could be done as "helicopter money" per person (say $50k) but distributed as 2 options:
- Option 1: Applied against a chosen mortgage,
- Option 2: Credit applied against IRD number, temporary PAYE suspension notice sent to employer.
I might (foolishly) decide my mortgage is manageable, but a relief from income tax for a while would be nice.
Basically we are living beyond our means. We spend more than we earn. How we pay for this as a society is by selling debt to foreigners. This is ultimately reflected though our Net international investment position which is deteriorating quickly How does this end? We start living within our means which means accepting a lower quality of life.
Bloomberg just published an article where S&P suggests our credit rating is under threat https://www.bloomberg.com/news/articles/2023-03-15/new-zealand-credit-r…
So we import 23% more goods and services than we export.
On top of that is another net $12b profits going out to foreign investors for assets we have sold them. That's $2300 per person every year, and equivalent to 10% of our total goods and services exports. National and ACT need to explain how much worse this will be when they crank up selling NZ to foreign owners.
Calling this sad state of affairs only "9% of GDP" is hiding the scale of the problem.
Well we shut down Marsden Point, let our wood pulp & product factories go bust and have turned a blind eye to excessive dairy intensification. All in the name of Capitalism, all the while our resilience has been eroded.
What were we really expecting to happen?
Modern politicians seem to not know anything about anything. So why do we let them hold positions of authority?
Hopes and dreams do not build a country.
Eventually this leads to a collapse in the value of the currency.
It's much harder to import goods and services at NZ$1 = US$0.22 than it is at 0.62. That can only be staved off by replacing the missing Export Receivable line in the National Account Ledger with Foreign Debt, and to do that we'd have to offer a return to our benevolent lenders much higher than today's rates. Think into the teens.
It's all very well to suggest "tourists will flock back and fill the hole!" But what if they don't? What if they too can't afford their OE like they once did?
Trouble, as this figure indicates, is on the way.
Only if they have the disposable income themselves to spend on anything. Just buying food at home might be a stronger pull than seeing a country at the bottom of the World that has pretty much the same to offer as, say, Norway, that's only a 30-minute flight ways from many and not 30 hours.
Short term thinking and lazy lifestyles. Um and we think that makes us successful. Lots of hangers on that we give billions, sucking the life out.
Then there's green party wonks choking up everything and shutting down industries from housing to farming to mining and exploration
Yep, property speculators wanting to retire early by bidding up the prices of existing homes. No thought for where that money comes from, and how unsustainable it all is. Oh its HW2, your probably meaning the record low number of unemployed that's the problem with society then? Greens shutting down the housing industry? Yeah we all live in caves now because the Green Party has next to no power in government currently.
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