New Zealand's seasonally adjusted current account deficit swelled to NZ$1.8 billion in the June 2010 quarter, as foreign owned New Zealand companies made bigger profits, foreign investors paid less tax and overseas visitors spent less.
(Updates add further detail, unadjusted deficit, economist's comments on the Canterbury earthquake being expected to narrow the deficit & chart).
Statistics New Zealand said today the June quarter deficit was up NZ$560 million from the March 2010 quarter and compares to a deficit of NZ$570 million in the June quarter last year.
The current account deficit for the year to June was NZ$5.6 billion, 3% of Gross Domestic Product (GDP), down from NZ$10.5 billion, or 5.7% of GDP, a year ago. Imports of goods, such as non-food manufactures, fell NZ$5.5 billion over this period.
Statistics New Zealand also said as of June 30, New Zealand's net international liabilities were NZ$163.7 billion, or 86.5% of GDP. That's up NZ$2.7 billion from March 31. The increase stemmed from net foreign investment inflows of NZ$1.3 billion, combined with falling overseas sharemarkets as a drop in offshore sharemarkets where New Zealand funds are invested decreases the value of our overseas assets.
John Morris, Statistics New Zealand's balance of payments manager, said the June quarter rise in the deficit from March was mainly due to an increase in the income deficit and lower taxes received from foreign investors.
"Foreign-owned New Zealand companies earned higher profits this quarter, driving the rise in the income deficit," Morris said.
Foreign investors also earned more from their other shareholdings and lending in New Zealand. And taxes paid by foreign investors were lower this quarter after a policy change on non-resident withholding tax, introduced by the Inland Revenue Department in February.
"Another factor increasing New Zealand's deficit with the rest of the world this quarter was a fall in spending by visitors to New Zealand," Morris said.
"Visitor numbers were down, along with spending per person."
However, rising prices for New Zealand goods overseas lifted goods exports, driving the goods surplus to NZ$1.2 billion, the biggest surplus since the Statistics New Zealand series began in 1987. Morris said the quarterly goods figures reflected the continuing impact of rising dairy export prices.
The unadjusted June quarter current account deficit was NZ$880 million, higher than the NZ$500 million to NZ$600 million expected by economists.
Earthquake could temporarily narrow deficit
ASB economist Jane Turner said smaller recent deficits were largely cyclical as weakened profitability caused a sharp decline in the income deficit and as lower import demand helped deliver trade surpluses.
"As the economic recovery continues to gain traction, we expect that the current account deficit will continue to widen mostly driven by an increase in the income deficit," Turner said.
"However, these underlying dynamics are likely to be interrupted over the next few quarters as a result of the Canterbury earthquake. We expect the overall impact will be to narrow the current account deficit temporarily, due to the one-off transfer coming from the insurance payout," said Turner.
She notes that the Earthquake Commission has indicated some its NZ$1.5 billion payout will come through selling shares, worth about 30% of its NZ$5.6 billion of assets, cutting New Zealand's holdings of foreign assets.
"In addition, as the Government is set to pick up the bulk of the public sector damage there remains the possibility it may have to increase its debt issuance, some if which may be purchased by foreigners."
Westpac economists, meanwhile, predicted that the annual deficit had probably bottomed out. The challenge from here, they said, was to identify how far it will widen as the economy recovers.
"We're becoming more confident that there has been a step-change in New Zealand's trade performance compared to the last cycle," the Westpac economists' said.
"Strong demand from developing Asia (particularly China) will continue to support export prices and volumes, and we expect to see more frequent trade surpluses in coming years. We expect imports will be more contained this decade than they were in the 2000s, because consumers are expected to be more subdued."
"While the investment income deficit will remain large, this should still be enough to see the overall deficit settle into a range of around 5% of GDP, compared to the 8.7% peak last decade."
No chart with that title exists.
44 Comments
So we exported goods worth $1,200,000,000 more than we imported but we ended up $1,800,000,000 deeper in hock to our foreign rentier masters - $4billion ( a thousand bucks for every kiwi peasant) in just three months siphoned off in interest and profits.
Has our government, anyone, got a clue how to fix this?
Sell the farms? Let's see now, if we sold a thousand four million dollar dairy farms every quarter we'd be able to keep up with what we are being bled, problem solved That should keep the lights on for a few more years.
"However, rising prices for New Zealand goods overseas lifted goods exports, driving the goods surplus to NZ$1.2 billion, the biggest surplus since the Statistics New Zealand series began in 1987. Morris said the quarterly goods figures reflected the continuing impact of rising dairy export prices."
Those statements overstate the true surplus. In terms of dairy, exports significantly exceeded the volume produced for export over the period reported. Inventory was run down and will now be rebuilt. That rebuilding will negatively impact export receipts over coming months.
Are you saying that we ought to pare back the size of gumnut in NZ / trim welfare / scrap WFF / reduce commissions / accept lower healthcare coverage ............... aha ha ! Will not happen in the egalitarian subpublic of Kiwiana .............. we will keep spending , until our new landlords [ foreign owned banks and corporations ] demand some repayment of capital ................. at the next crisis , then both National & Labour may agree to gumnut austerity !
The Duke " Who said there is any problem? Just accept that economies go through ups and downs"
Ups and downs? We've been running a consistent current account deficit for about four decades now. That's why we owe the equivilent in straight debt of 40,000 $4 million dairy farms - three times more than we have.
On top of that we have overseas ownership of banks, mines, oil and gas production, electricity generators and retailers, general big box retailers, shopping malls, forests, farms, tourism operations. Consideration is being given to the sale to foreign interests (whole or partly) of ports, airports, municipal water and sewarage, prisons, NZ post, Kiwibank, roads and bridges.
The Kiwi citizen will shortly be having their ticket clipped by foreign big business for the air they breath (ETS) and you say we haven't got a problem.
Are you mad?
Duke I see you are still abusing people and using bad language which just shows a total lack of education to us all. Have you noticed the article in the NZ Herald stating 500 million of overseas funds have been extracted out of commercial property in NZ over the last two years. You should have sold down at the very least or sold everything in 2007 when it all peaked. Just watch those valuations continue to drop and purchasers if they exist demanding higher yields.
I am not too sure about that Wolly as the Man did not comment as often as the Duke is. In fact I think the Duke is commenting too often just like yourself which is becoming very tiresome I am sure for a lot of other people who visit this site. In fact I think you and a few others are ruining it. Less comments with more substance would be better.
Duke - a quick lesson. Most here already get it.
*. No activity (including economic activity) exists without energy.
*. Beyond peak flow-rates (and acknowledging efficiencies) you don't grow activity.
*. That would have been OK, if not for the fractional reserve problem.
*. It was obvious that we were going to be bigger ( in terms of population, consumption and debt) when we ran into the peak thing, than we'd ever been before.
*. You watched that growth-no-longer-being-underwritable thing go overshoot, not unlike Wylie Coyote over the cliff, and a desperate attempt to maintain. Actually, resource overshoot started in 1980 - just for the record. Oil is about now. Gold has been and gone. Copper is 2030 AT CURRENT EXTRACTION RATES, but closer if rates increase.
*. It failed, the overshoot (debt) is unrepayable, and fractional-reserve systems are doomed from this point on.
*. The only one which will work, is zero-interest, fully-underwritten 'loans', but I sense that you could only have initiated that from a neutral start - I doubt you can seamlessly morph to there from where we are now. Not sure if the underwriting can be evaluated fast enough and accurately enough either, on the downslope.
*. There are more than one end-game scenario. Heinberg talks of "Last Man Standing', Powerdown, Waiting for the Magic Elixir, and Building Lifeboats. (I've done 2 and 4).
*. I suspect you're a 3.
Put up yer dukes pal : I resent that ! There's me , St. Nick , Sore-Loser , Walter Kunz .............. dozens of us , don't let Wolly & Co. get all the glory . We try hard too , so very very hard . Not easy being an idiot . Ask any one of New Zealand's Prime Ministers of recent years .
Quite, GBH! But I'm not too sure about the 'idiot' bit. Never mind. Just back from a hol. up North(land) and, golly, there's some beach property of all sorts on the market! Want a bach? Everything from a ply 1 bedder to a multi-unit,concrete, poured holiday-home. More choice than one can shake a stick at.
Grand to have you back , amongst us idiots , St. Nick . Our dear friend Duke ( a.k.a. Marion ) has just spat the dummy and left us .............. hope the door don't hit him on the arse , on the way out , pardner .
Up north meself , Ilo Ilo City , Philippines ! 32'c and sunny . Getting a 2-stage Cantabrian sun-tan [ before you go brown , you first have to go white , from being blue ! ]
Thanks for the offer of a bach , but I got one , on Panay Bay . Beachfront . We move in tomorrow ! Coconut palms abound . And the water is a steady 28'c year around .............. Hey , how is it in NZ , old chum ?
Well..... My Lovely wife asked on ariving back in Auckland ( an hour ago, and what am I doing ?...Sad!)" Did you see anything that grabbed you?" My look gave away the answer. But, frankly, merely because of the asking prices ( still). Loved places at Copper's Beach and Taipa etc. but reality still hasn't hit there...yet. Have an old, old friend in Vietnam ( been there since '89), who's trying to tempt me. But I'm hoping to 'be grabbed' here. My stepson tells me it's bruddy cold down Johns Road, so stay put where you are! Cheers. (Another Bintang or is it San Miguel there?)
The pot calling the kettle black Duke. Your crude rude and ignorant ravings every day all day put you in a class of your own. You will be surely missed. Cash is king. Now is not the time to have anything in property other than your home and perferably debt free. Just watch those valuations on all asset classes drop over the next few years. No wonder you are so bitter,angry and twisted. Get rid of them now if you can.
I've put you down for a copy of Parky's book Gummy Bear ...for xmas don't you know...that plus a big bag of Gummy Bears, a bottle of Rum and three of Coke to keep Warren happy....stay fluid on that lot cos Mr Market enjoys a little poke at things when the lemmings are all running one way.
i think we may be onto something,team, if we've finally managed to get rid of that toxic twat calling himself the Duke..more like the Puke!
he never had anything much to say other than snide and petty sarcasm....i actually i think he had the hots for Wolly and couldn't handle the rejection...but i'll lay you a hundred to one he'll be watching all day everyday...hell knoweth no fury like a Puke scorned!
Oy Powerdownkiwi i hope u rode your push bike to work 2day remember it was national bike to work day!
Anyway on a more serious note some may remember a quote i made from the past reguarding ...."It "s when people havn't a roof over there heads That"s When The Trouble Starts" end of quote.
Well some Chch city councillors are just finding this out now from DISTRORT Avonside residents
3 WEEKS WITHOUT HELP !!
WHAT A BLOODY DISGRACE NEW ZEALAND_ _ _ _ _ / / / / / / IIIIIIIIIIIIII !
There is a simple lesson here for govt and the overpaid pointy heads in wgtn....this country needs emergency accomodation in a location safe from all the disasters...somewhere that 10ooo people can be taken at short notice and be looked after for at least 12 months. It's pretty bloody obvious.......but where?
Shyt - no I didn't, for the simple reason I forgot to get a job.
Not quite right - I write for a crust, and was doing it this morning sitting on the doorstep of a little shack my son built himself in our forest - back when he needed that kind of space.
The pelton wheel whirring quietly in the creek, charging the laptop. Six eggs from the chooks today, the fruit trees are budding, A good day, regardless of what out titled ex-contributors might think.
I've got several bikes, though. Two recumbents, a tri-bike, a few MTB's, and a Claude Butler tandem. Plus the kid's old recumbent trike. Love 'em.
Down this way, there is an outfit trying to get commuter rail going - today was 'catch the train' day, so my better half did that. Conscience eased....
Arr very nice powerdown kinda thort that myself - you did'nt bike to work, thats my physic side didn't pic your a writer tho wish i could write without spelling so baddley tho.
But hey that's 48 for ya.
Hope those trains ran on steam and not powered by coal.
Battery powered cars will be the prefered transport of the future a guy in Northland made his own even sells power back to the grid from his pelton wheel in the creek so in fact they pay for him to drive not so silly aye !
Oh for the record i cycle to work everyday just gota watchout for crazys driving cars.
Add E Oce.
oK SORRY Horace so i didn't pass School Cert english yea got 48 if i remember and was distraught at that at the time. 49 at the time would have been a pass cause it went to 50.
Mind you if i had sat under todays NCEA or whatever I'm sure I would have" ACED IT"
Anyway who really cares about that and deficits etc when we still got people out there with children living in UNSAFE HOUSES !
Have a read of the News and see what conditions they're trying to live in.
Well said Wolly
Yeah why can't the army set up a tent city for them at least they will have clean running water and toilets , showers a hot meal and a bed.
They can even guard there or wats left of there houses so they can have peace of mind no ratbags will well there washing machine down the driveway if it isn't broke too.
THESE PEOPLE AND THEIR FAMILYS NEED HELP NOW TONIGHT NEW ZEALAND
WAKE UP !!!!!
History is full of situations where the incumbent leadership is inappropriate when the paradigm changes.
When you think about it, it can't be any other way. Sometimes it's smooth - as wnen they voted Churchill in and out, either side of WW11. Sometines it's rough - as when the Confederate South failed to accept the industrial revolution.
This one is just global, and either mass denial, or mass non comprende.
It will be ugly.
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