The deficit between what we earn overseas and what we spend drops to 6.2% of GDP, but remains at levels generally seen as too high

The deficit between what we earn overseas and what we spend as a country has narrowed - but, by as much as expected and it still remains at elevated levels.

Statistics NZ reports that in the 12 months to December 2024 our current account deficit was $26.4 billion, 6.2% of our GDP.

Economists had been expecting the deficit to reduce to around 6.0%, so the figure is proving stubborn in coming down.

However, the previous figure for the 12 months to September 2024 was revised upwards by Stats NZ from the originally announced 27.0 billion up to $27.3 billion, which was 6.5% of GDP.

While economists are expecting that our current account deficit will gradually shrink over time, the extent to which we are spending more than we earn in the world has attracted the attention of credit rating agencies, who have previously stressed that they want to see that deficit coming down or else it could cause our sovereign debt ratings to come under review.

The deficit hit a peak of 9.2% of GDP in 2022 and has been falling slowly since.

In terms of quarterly figures, Stats NZ said the seasonally adjusted current account deficit narrowed to $5.9 billion in the December 2024 quarter. This was $475 million narrower than the previous quarter due to an increase in the value of services exports (up $688 million) and goods exports (up $669 million).

"Spending by overseas visitors while in New Zealand led the increase in services exports, while dairy and meat led the increase in goods exports," Stats NZ's international accounts spokesperson Viki Ward said.

At December 31, 2024, New Zealand’s net international investment liability position was $210.7 billion, compared with $209.8 billion as at 30 September 2024.

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 than assets with the rest of the world.

Stats NZ said a combination of purchases of investments offshore by domestic investors, onshore by overseas investors, and the revaluation of these investments led to increases in New Zealand’s asset and liability positions at December 31.

In  quarter, the value of New Zealand holdings of international assets increased by $34.1 billion to $438.9 billion. New Zealand's liabilities to the rest of the world increased by $35.0 billion to $649.6 billion.

"A key element of revaluations this quarter was the depreciation of the New Zealand dollar against major currencies," Ward said.