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NEW ZEALAND: Current Account Position Continues Gradual Improvement

NEW ZEALAND
APACNew ZealandBulletMarketsFixed Income BulletsForeign Exchange Bullets

NZ’s Q3 current account deficit narrowed to $6202mn from $7094, the lowest in over three years. This brought the ratio to GDP down to 6.4%, better than expected and consistent with the RBNZ’s Q1 2025 forecast of 6%. There has now been an improvement of 2.8pp since the 9.2% peak in Q4 2022. With domestic demand weak, growth in imports of goods and services ran below exports. Q3 GDP released Thursday is forecast to fall again.

  • Imports of goods and services rose 0.2% y/y down from 1.2% in Q2. The weakness is being driven by merchandise which fell 4.0% q/q and 2.4% y/y, its sixth consecutive annual decline. Given the data are nominal lower global oil prices would have weighed on import values, but petrol volumes were higher. There were also lower car imports. Services were stronger rising 1.5% q/q and 7% y/y up from 5.4% y/y.
  • Exports rose 2.8% y/y up from 2.0% with the 0.5% q/q increase driven by services. They rose 3.0% q/q but fell 0.7% y/y due to negative base effects. Merchandise shipments fell 0.6% q/q but were 4.4% y/y higher.
  • The primary income deficit narrowed $120mn to $3.5bn as NZ investors earned more from overseas than foreign investors in NZ. 

NZ current account % GDP YTD

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NZ’s Q3 current account deficit narrowed to $6202mn from $7094, the lowest in over three years. This brought the ratio to GDP down to 6.4%, better than expected and consistent with the RBNZ’s Q1 2025 forecast of 6%. There has now been an improvement of 2.8pp since the 9.2% peak in Q4 2022. With domestic demand weak, growth in imports of goods and services ran below exports. Q3 GDP released Thursday is forecast to fall again.

  • Imports of goods and services rose 0.2% y/y down from 1.2% in Q2. The weakness is being driven by merchandise which fell 4.0% q/q and 2.4% y/y, its sixth consecutive annual decline. Given the data are nominal lower global oil prices would have weighed on import values, but petrol volumes were higher. There were also lower car imports. Services were stronger rising 1.5% q/q and 7% y/y up from 5.4% y/y.
  • Exports rose 2.8% y/y up from 2.0% with the 0.5% q/q increase driven by services. They rose 3.0% q/q but fell 0.7% y/y due to negative base effects. Merchandise shipments fell 0.6% q/q but were 4.4% y/y higher.
  • The primary income deficit narrowed $120mn to $3.5bn as NZ investors earned more from overseas than foreign investors in NZ. 

NZ current account % GDP YTD

Keep reading...Show less