Car imports drive current account into deficit
The country’s current account is back in the red with an increase in car imports helping push the deficit to $400 million in the September 2020 quarter, according to Stats NZ.
The seasonally adjusted figure comes after a $600m surplus in the previous quarter.
Experts at Stats NZ say the main contributor to the deficit was an increase in goods imports of $1.1 billion, following a fall in the June 2020 quarter.
Peter Dolan, international statistics senior manager, says: “The rise in goods imports was mainly driven by an increase in car imports.”
The current account records New Zealand’s transactions with the rest of the world – including its net trade in goods and services, its net earnings on cross-border investments, and its net transfer payments.
A net improvement in our trade balance has emerged during the Covid-19 pandemic as the country has imported less but key exports have remained strong.
On an annual basis, the current account deficit for the September 2020 year narrowed to $2.6b, compared with a deficit of $11.7b in the September 2019 year.
The services balance returned to surplus in the September 2020 quarter. This was due to a $270m rise in services exports and a $304m fall in services imports.
“While travel and transportation services trade have fallen since border restrictions were imposed in March, our other top services have remained steady, now making up a larger proportion of the total,” explains Dolan.
Meanwhile, New Zealand’s net international liability position was $177.9b, or 55.5 per cent of GDP, at September 30, 2020. Stats NZ reveals this is $2.4b narrower than at the end of June this year.
The net international investment position represents the difference between New Zealand’s assets and liabilities with the rest of the world. New Zealand has a net liability position as it has more liabilities with the rest of the world than it has assets.
“Overseas investors hold more assets in New Zealand than we hold overseas but the gap between our external assets and liabilities became smaller in the last three months,” notes Dolan.
The narrowing of the liability position was due to a combination of transactions and changes in the value of assets and liabilities arising from market prices and financial derivatives.