Balance of payments improvement weaker than expected (Update 2)

Watch on our video page here. Watch on YouTube here. The December 2009 balance of payments data released by Statistics NZ today has surprised on the negative side, coming in at -2.9% for the year, compared with economists forecasts of about -2.0% and the RBNZ forecast of -2.2%. (Updated with more detail.) New Zealand’s seasonally adjusted current account deficit was NZ$3.11 bln in the December 2009 quarter, a turnaround from the September 2009 quarter surplus of NZ$39 mln. Economists had expected a December deficit of about NZ$1.6 bln. The large turnaround was driven by an increase in the income earned from foreign investment in New Zealand - although one reason it was lower in earler quarters was due to the bank tax cases. For the year to December, the deficit was NZ$5.473 bln. The goods balance was a surplus of NZ$237 mln in the December 2009 quarter, down NZ$405 mln from the September 2009 quarter surplus. This is now the fifth consecutive surplus on the goods balance, but the surplus has been getting smaller since peaking in the March 2009 quarter. Exports of goods decreased $255 million this quarter, while imports of goods increased NZ$150 mln. Net international liabilities were NZ$167.5 bln (90.3% of GDP) at 31 December 2009, NZ$5.3 bln smaller than the 30 September 2009 position. Foreign-owned companies reinvested a record NZ$1.5 bln of their profits back into the New Zealand economy during the December 2009 quarter. Westapc was expecting a -2.1% current account balance as a % of GDP, ANZ was expecting -1.8%, and the RBNZ forecast -2.2% in their March 2010 Monetary Policy Assessment. This weaker-than-expected balance of payments result may mean tomorrow's December GDP results will also be lower than expected, and in turn may well mean the RBNZ will delay its "middle-of-the-year" OCR rate hikes and stimulus removal. The currency initially shed -40 bps on the news, but has settled -20 bps lower.