Balance of payments records the value of the country’s transactions with the rest of the world. It shows changes in financial claims on, and liabilities to, the rest of the world. International investment position is a snapshot of the country’s financial assets and liabilities.
Figures compare March 2021 quarter with December 2020 quarter (unless otherwise stated).
- New Zealand’s seasonally adjusted current account deficit was $5.0 billion.
- The current account deficit for the year ended March 2021 narrowed to $7.2 billion (2.2 percent of GDP) from the $9.1 billion deficit for the March 2020 year (2.8 percent of GDP).
As at 31 March 2021:
- New Zealand’s net international liability position was $160.9 billion, down from $178.4 billion at 31 December 2020.
In the March 2021 quarter:
- The seasonally adjusted goods balance had a $1.5 billion deficit compared with a surplus in the previous quarter.
- The seasonally adjusted services deficit widened to $1.6 billion.
- The primary income deficit widened to $1.7 billion.
- The financial account recorded a net outflow of $2.4 billion.
New Zealand’s current account balance was a seasonally adjusted $5.0 billion deficit in the March 2021 quarter, $3.0 billion wider than the December 2020 quarter deficit.
The widening of the seasonally adjusted current account deficit was the result of a $1.6 billion movement in the goods balance from a surplus to a deficit, and a $945 million widening of the services deficit.
Goods and services
In the March 2021 quarter, seasonally adjusted goods exports were down $251 million while imports were up $1.3 billion. This resulted in a $1.6 billion movement in the goods balance from a surplus to a $1.5 billion deficit. A variety of goods drove this increase with consumption goods being the largest contributor.
The seasonally adjusted services deficit was $1.6 billion in the March 2021 quarter, with exports down $716 million and imports up $228 million. The decrease in seasonally adjusted services exports was driven by travel export services, down $334 million.
Primary and secondary income
Primary income flows between New Zealand and the rest of the world represent income earned from investments and compensation of employees.
The primary income deficit was $1.7 billion in the March 2021 quarter, $409 million wider than the previous quarter. This change was driven by a decrease in income earned by New Zealand’s investment abroad and an increase in income earned by foreign investment in New Zealand.
Income from New Zealand investment abroad was down $101 million from the December 2020 quarter to $2.4 billion, driven by falls in income earned on direct investment (down $236 million) and other investment (down $31 million), partly offset by a rise in income earned on portfolio investment (up $171 million).
Foreign investment in New Zealand earned overseas investors $4.0 billion in the March 2021 quarter, $301 million more than in the December 2020 quarter. This was driven by rises in income earned on direct investment (up $272 million) and portfolio investment (up $61 million), partly offset by a fall in income earned on other investment (down $32 million).
Secondary income records the provision of goods, services, or financial instruments between New Zealand and the rest of the world without an equivalent economic value received in return. This includes foreign aid, remittances, and taxes on income and wealth in or out of New Zealand.
The secondary income deficit was $240 million in the March 2021 quarter, widening $84 million from the previous quarter.
Sharp changes in activity pose challenges for our usual seasonal adjustment processes. This affected some series since the March 2020 quarter. We reviewed all series exhibiting unusual changes in activity and applied outliering of the latest data point where required, which had the effect of subduing the impact of unusual data points on the seasonal adjustment process. We will continue to monitor our seasonal adjustment over the next few quarters and will make interventions where required.
It is not possible to estimate current trend levels to Stats NZ’s usual quality standard until we know the full effect of COVID-19 on the time series. Once the series stabilises, we will estimate the COVID-19 effect on the trend. The timeframe for this will vary for different series depending on how they are specifically affected by COVID-19.
Financial account balance
The financial account records transactions in financial assets and liabilities between residents and non-residents. It measures transactions that increase or decrease New Zealand investment abroad and foreign investment in New Zealand.
The financial account recorded a net outflow of $2.4 billion in the March 2021 quarter.
Foreign investment in New Zealand
Foreign investment in New Zealand recorded a net outflow of $3.7 billion in the March 2021 quarter. This was driven by the repayment of other investment liabilities ($7.9 billion) and the settlement of financial derivative liabilities ($1.8 billion). The outflow of other investment was driven by a fall in deposits held on behalf of non-residents (by New Zealand banks) and the repayment of loan liabilities.
These outflows of foreign investment were partly offset by investments of $4.1 billion in portfolio investment liabilities and $1.9 billion in direct investment liabilities.
New Zealand investment abroad
New Zealand investors brought a net $1.2 billion back into the country from assets previously held overseas. This inflow included settlements of $2.2 billion of financial derivative assets, disinvestment of $937 million in other investment, and disinvestment of $897 million in reserve assets.
Partly offsetting these inflows of funds was a net $2.4 billion investment in portfolio investment assets abroad, mainly by the New Zealand pension and investment fund sector.