WELLINGTON, March 24 (Reuters) - New Zealand's annual current
account deficit narrowed to its smallest in eight years in the
fourth quarter, driven by weak imports and lower returns for
foreign investors.
The annual deficit stood at NZ$5.47 billion ($3.9 billion) in the year to Dec. 31, compared with a revised NZ$5.9 billion deficit in the previous quarter, data showed on Wednesday.
Analysts in a Reuters poll had forecast an annual deficit of NZ$3.62 billion, with a quarterly shortfall of NZ$1.63 billion.
The current account data does not usually affect the central bank's interest rate outlook.
***************************************************************
KEY POINTS:
- Q4 actual deficit NZ$3.57 billion
- Q4 s/adjusted deficit NZ$3.1 billion from a downwardly revised surplus NZ$39 million in Q3 due to a rise in profits earned by foreign investors in NZ.
- Deficit put at 2.9 percent of GDP (Reuters poll -1.9 pct) lowest since December 2001.
- Click on for key current account table
COMMENTARY:
DARREN GIBBS, CHIEF ECONOMIST, DEUTSCHE BANK
'The investment income balance was much wider than expected. The bulk of it demonstrates a rebound in corporate profits which has caught people by surprise. Arguably it's a good thing because it's consistent with the idea that towards the end of last year corporates had improved their bottom lines.'
'I suspect the bottom is probably close, it may go a little bit lower over the next couple of quarters, but as the economy continues to normalise, you're going to get a pick up in imports from low levels, higher interest rates which will make it more expensive to fund our debt and one would think company profits can improve a bit further. So this probably as good as it gets.'
PHILIP BORKIN, ECONOMIST, GOLDMAN SACHS JBWERE
'It appears to be largely an investment income balance story. There's a partial reversal of tax charges but also a sharp improvement in the profitability of foreign firms operating in New Zealand, which you can argue is partly a positive thing.'
'When the economy continues to recover, as we are expecting it to, it does suggest the current account deficit will continue to deteriorate and with a large stock of foreign debt, it's going to be a slow grind to see it improve.'
CAMERON BAGRIE, CHIEF ECONOMIST, ANZ-NATIONAL BANK
'It proves just how volatile this can be intra-quarter and a reminder there is a structural adjustment going on across the economy.'
'The goods balance was worse than we expected and the services balance as well, which caps any of the upside risk to the Q4 GDP numbers.'
'There was some risk we saw a stronger GDP than the 0.6 the RBNZ had pencilled in, but I think with these numbers they won't be too far away from the mark.'
ROBIN CLEMENTS, SENIOR ECONOMIST, UBS 'Most of it appeared to be in the net investment category, which looks like its the tax charges which reduced the outgoings in prior quarters.' 'We would be looking for signs this might have implications for GDP numbers. The goods balance was a bit worse than expected, and that might potentially be a negative for the GDP announcement tomorrow.'
MARKET REACTION:
The New Zealand dollar fell nearly a quarter of a cent to a low of $0.7042/47 before settling around $0.7060. Interest rate futures were unmoved by the data.
LINKS:
- The full data is available at the Statistics New Zealand Web site: www.govt.nz
- For all New Zealand news and data, 3000 Xtra users can click on
BACKGROUND:
- New Zealand's 15 month recession, which ended in the second quarter last year, and gradual recovery have seen the yawning trade deficit shrink markedly as imports have fallen more than exports.
- The Reserve Bank of New Zealand said this month that it expected the improvement in the current account to be temporary, falling to 1.8 percent of GDP in the year to March 2010 but then rise to 7.2 percent over the next two years.
- The NZ Treasury department has forecast a deficit of 2.9 percent of GDP at March 2010, rising to 6 percent by 2014.
- The size of New Zealand's current account deficit has long been a concern for ratings agencies, although they have noted the recent improvement. However, Fitch Ratings, which has New Zealand at AA-plus with negative outlook, has said the economy needs to move away from reliance on residential investment to more diversified growth.
($1=NZ$1.42)
(Wellington newsroom tel 64 4 471 4234, fax +64 4 4736 212, wellington.newsroom@reuters.com) Keywords: NEWZEALAND ECONOMY/CURRENTACCOUNT (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The annual deficit stood at NZ$5.47 billion ($3.9 billion) in the year to Dec. 31, compared with a revised NZ$5.9 billion deficit in the previous quarter, data showed on Wednesday.
Analysts in a Reuters poll had forecast an annual deficit of NZ$3.62 billion, with a quarterly shortfall of NZ$1.63 billion.
The current account data does not usually affect the central bank's interest rate outlook.
***************************************************************
KEY POINTS:
- Q4 actual deficit NZ$3.57 billion
- Q4 s/adjusted deficit NZ$3.1 billion from a downwardly revised surplus NZ$39 million in Q3 due to a rise in profits earned by foreign investors in NZ.
- Deficit put at 2.9 percent of GDP (Reuters poll -1.9 pct) lowest since December 2001.
- Click on for key current account table
COMMENTARY:
DARREN GIBBS, CHIEF ECONOMIST, DEUTSCHE BANK
'The investment income balance was much wider than expected. The bulk of it demonstrates a rebound in corporate profits which has caught people by surprise. Arguably it's a good thing because it's consistent with the idea that towards the end of last year corporates had improved their bottom lines.'
'I suspect the bottom is probably close, it may go a little bit lower over the next couple of quarters, but as the economy continues to normalise, you're going to get a pick up in imports from low levels, higher interest rates which will make it more expensive to fund our debt and one would think company profits can improve a bit further. So this probably as good as it gets.'
PHILIP BORKIN, ECONOMIST, GOLDMAN SACHS JBWERE
'It appears to be largely an investment income balance story. There's a partial reversal of tax charges but also a sharp improvement in the profitability of foreign firms operating in New Zealand, which you can argue is partly a positive thing.'
'When the economy continues to recover, as we are expecting it to, it does suggest the current account deficit will continue to deteriorate and with a large stock of foreign debt, it's going to be a slow grind to see it improve.'
CAMERON BAGRIE, CHIEF ECONOMIST, ANZ-NATIONAL BANK
'It proves just how volatile this can be intra-quarter and a reminder there is a structural adjustment going on across the economy.'
'The goods balance was worse than we expected and the services balance as well, which caps any of the upside risk to the Q4 GDP numbers.'
'There was some risk we saw a stronger GDP than the 0.6 the RBNZ had pencilled in, but I think with these numbers they won't be too far away from the mark.'
ROBIN CLEMENTS, SENIOR ECONOMIST, UBS 'Most of it appeared to be in the net investment category, which looks like its the tax charges which reduced the outgoings in prior quarters.' 'We would be looking for signs this might have implications for GDP numbers. The goods balance was a bit worse than expected, and that might potentially be a negative for the GDP announcement tomorrow.'
MARKET REACTION:
The New Zealand dollar fell nearly a quarter of a cent to a low of $0.7042/47 before settling around $0.7060. Interest rate futures were unmoved by the data.
LINKS:
- The full data is available at the Statistics New Zealand Web site: www.govt.nz
- For all New Zealand news and data, 3000 Xtra users can click on
BACKGROUND:
- New Zealand's 15 month recession, which ended in the second quarter last year, and gradual recovery have seen the yawning trade deficit shrink markedly as imports have fallen more than exports.
- The Reserve Bank of New Zealand said this month that it expected the improvement in the current account to be temporary, falling to 1.8 percent of GDP in the year to March 2010 but then rise to 7.2 percent over the next two years.
- The NZ Treasury department has forecast a deficit of 2.9 percent of GDP at March 2010, rising to 6 percent by 2014.
- The size of New Zealand's current account deficit has long been a concern for ratings agencies, although they have noted the recent improvement. However, Fitch Ratings, which has New Zealand at AA-plus with negative outlook, has said the economy needs to move away from reliance on residential investment to more diversified growth.
($1=NZ$1.42)
(Wellington newsroom tel 64 4 471 4234, fax +64 4 4736 212, wellington.newsroom@reuters.com) Keywords: NEWZEALAND ECONOMY/CURRENTACCOUNT (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.