Surge in exports pushes up surplus
A surge in meat exports to record levels and higher spending by tourists in New Zealand has seen the March quarter current account surplus reach a new high of $1.4 billion.
Economists said the figures showed the economy was solid, with a combination of a record trade surplus, higher spending by tourists despite the high New Zealand dollar, and an improvement in overseas liabilities.
Seasonally adjusted, the current account was in the red to the tune of $585 million, a significant improvement from the December quarter.
The current account measures the balance of goods and services and investments - all of the country's transactions with the rest of the world.
The annual current account deficit was equal to 2.8 per cent of GDP for the year, the lowest since 2010, and it may narrow more this year. The deficit has improved by about $2 billion in the past year because of strong exports.
But the recent drop in some export prices from their peaks and a rebound in imports in coming years was likely to see that deficit worsen next year towards 5 per cent of GDP economists said.
The current account figures came out ahead of today's GDP figures, which are expected to show March-quarter growth of better than 1 per cent, a strong start to the year.
The strong quarter reflected rising meat export volumes and prices, pushing up the goods trade surplus to a record $1.8 billion in the March quarter.
But dairy exports were down from the previous peak.
And the big drop in global dairy auction prices in recent months, down about 25 per cent since February, means the trade picture is not as rosy as it was earlier this year, with lower prices expected to show up in export figures in coming months. However, dairy export volumes are expected to remain high due to demand from China, and some economists believe dairy prices may have steadied this month.
And in the past two months log prices have also slumped about 20 per cent following a slowdown in China. Dairy is New Zealand's top export, followed by meat and then forest products.
Statistics New Zealand figures out yesterday showed the annual current account deficit was equal to 2.8 per cent of GDP. That was much improved from last year, as the farm sector bounced back from last year's drought, which had slowed export volumes in the middle of last year.
Economists expected the current account deficit to worsen again in the next couple of years.
Westpac Bank senior economist Michael Gordon said on a quarterly basis, the March figures were likely to be "as good as it gets" for the current account balance. On an annual basis, the deficit may narrow closer to 2 per cent as the impact of last year's drought dropped out.
But commodity prices had now come off their peaks, while imports were likely to keep rising. Westpac expected the current account deficit to settle at about 4 per cent of GDP in the longer term - well short of the 8 per cent level seen in 2008.