More exports, especially meat, and higher spending by tourists have improved the current account balance to a shortfall of $585 million in the March quarter.
That was more than $300m smaller than the deficit in the December quarter last year, Statistics New Zealand figures show.
The annual current account balance was equal to 2.8 per cent of gross domestic product, which was exactly in line with economists' forecasts.
Exports were strong for farm products, especially meat, and commodity prices were high in the March quarter, leading to the highest seasonally adjusted balance on goods trade.
There was also a rise in spending by tourists that boosted the services balance, Westpac economists said.
The March quarter deficit was the smallest since 2010 but was likely to be as good as it gets on a quarterly basis, Westpac said.
The balance of payments measures the difference between what New Zealand earns and spends overseas.
For the March year, the deficit was $6.3 billion, equal to 2.8 per cent of GDP. That was a significant improvement from $7.6b in the year to December 2013.
The better March quarter balance of payments reflected higher exports and the peak season for tourists coming to New Zealand.
The figures showed New Zealand's seasonally adjusted current account balance was a deficit of $0.6b in the March quarter.
"The smaller deficit follows last quarter's $1.6b fall, making this the smallest current account deficit since 2010," Statistics New Zealand international statistics manager Jason Attewell said.
The balance on just goods and services was a surplus of $2232m in the March quarter, up $415m from the December quarter surplus, which was the largest-ever surplus at the time.
Exports of goods increased $360m across a range of commodities, with meat the most significant contributor to the rise.
Dairy product exports fell from last quarter's peak but remain high.
Exports of services also increased as overseas visitors spent more while they were here.
Before taking out usual seasonal effects, the current account balance was a surplus of $1.4b - the largest current account surplus recorded. This represents a $1.3b increase from the March 2013 quarter surplus, mainly driven by increased dairy product exports.
"New Zealand is most likely to record a current account surplus in March quarters, when we have more overseas visitors coming to New Zealand," Attewell said.
A current account surplus means New Zealand's earnings from the rest of the world exceeded our overseas expenditure. As a result, the country had $1.3b of net outward investment this quarter, mostly because of the Reserve Bank increasing its foreign exchange assets.
New Zealand's net international liability position, which measures the value of our overseas assets less our overseas liabilities, was $148b (65.3 per cent of GDP) at the end of March.
That was up $1.1b from last December through valuation changes increasing the value of our overseas liabilities.