March 23, 2012

New Zealand's current-account deficit down in Q4

Reflecting record exports of dairy products and lower dividends paid to overseas investors, New Zealand's current-account deficit narrowed more than expected in the fourth quarter.

The current account gap was US$2.03 billion, seasonally adjusted, in the three months ended December 31, from a gap of US$2.79 billion three months earlier, according to Statistics New Zealand.

The annual gap shrank to US$8.3 billion, or 4% of gross domestic product, from US$8.8 billion, or 4.3% of GDP three months earlier.

A quarterly deficit of US$2.75 billion and an annual gap of US$8.16 billion were forecast, according to a Reuter's survey.

Dairy farmers reaped the benefits of favourable weather in the final three months of 2011, allowing them to lift output at a time when the kiwi dollar was weak enough to mitigate the effects of global prices coming off their highs.

The outlook is likely to be more muted for the nation's biggest merchandise export, with Fonterra cutting its payout forecast for the current season and prices in the latest GlobalDairyTrade auction falling 4.5%, the biggest drop in eight months.

"Although the goods balance remains firmly in positive territory for now, tougher conditions for exporters and softer commodity prices are likely to see this come under pressure in 2012," Westpac senior economist Anne Boniface said in her preview of yesterday's figures.

The goods balance was a surplus of US$1.066 billion in the fourth quarter, up US$523 million from the third quarter.

The value of dairy exports was at its highest level since the government statistician began tracking the series, it said. The services deficit fell by US$84 million to US$199 million, which was attributed to higher spending by overseas visitors.