Overview of the December 2011 quarter
Rising goods surplus behind smaller current account deficit
New Zealand's seasonally adjusted current account was a deficit of $2,033 million for the December 2011 quarter. This is $760 million smaller than the September 2011 quarter deficit.
The falling deficit was due to improvements across all components.
- The goods surplus rose $523 million.
- The income deficit fell $138 million.
- The services deficit fell $84 million.
- The transfers deficit fell $16 million.
Exports of goods rise and foreign investors earn less from New Zealand
Increased volumes of dairy product exports were behind the rise in exports of goods in the latest quarter. Dairy export volumes were at their highest-ever level.
The fall in the income deficit was partly due to the lower dividends received by overseas portfolio investors from their New Zealand shares. Profits earned by foreign-owned New Zealand companies were also down this quarter.
Higher visitor numbers due to Rugby World Cup
Expenditure by overseas visitors to New Zealand increased this quarter, with visitor numbers up due to the Rugby World Cup. The September quarter also had a rise in visitor numbers and expenditure.
Smaller year-ended current account deficit
The current account balance was a deficit of $8.3 billion (4.0 percent of GDP) for the year ended December 2011. This compares with a deficit of $8.8 billion (4.3 percent of GDP) for the year ended September 2011.
The lower current account deficit was mainly due to the goods surplus increasing $0.5 billion. The services, income, and transfers balances remained relatively stable.
New Zealand's current account trend shows a widening deficit over the past two years. A surplus on trade in goods and services has been more than offset by an increasing income deficit, mainly caused by interest payments on New Zealand’s rising international debt.
First significant divestment of both assets and liabilities in three years
The financial account recorded a net investment inflow of $2.2 billion in the December 2011 quarter. New Zealand's overseas assets and liabilities both decreased this quarter.
The fall in New Zealand's overseas assets featured New Zealand companies and the official sector withdrawing deposits held overseas, while over $1 billion of claims related to the Canterbury earthquakes were also settled during the quarter. The fall in New Zealand's overseas liabilities featured Government bonds held by overseas investors maturing this quarter.
Net international investment position remains relatively flat
At 31 December 2011, New Zealand's net international liabilities were $147.0 billion (71.9 percent of GDP), compared with $146.2 billion (72.0 percent of GDP) at 30 September 2011.
Official sector in a net debtor position
For the first time since 31 December 2005, New Zealand's official sector is in a net overseas borrowing position. This is despite an estimated $4.5 billion of outstanding claims on overseas reinsurers owed to this sector, which are included as assets for New Zealand.
Reinsurance claims and settlements from the Canterbury earthquakes
Statistics New Zealand has received updated information on the amount of total reinsurance claims from non-residents for the December 2011 quarter. See the table below for details.
| Updated reinsurance claim estimates
Total outstanding claims at end of period
- Total claims from all three earthquakes are now estimated at $15.3 billion, revised upwards by $1.3 billion from previously published estimates.
- Of these claims, a total of $2.6 billion was settled at 31 December 2011.
- The value of claims settled during the December 2011 quarter was $1.1 billion. These settlements flow through the financial account as reducing New Zealand's overseas assets.
- This leaves a total of $12.7 billion of claims outstanding. These claims remain in measured stocks of New Zealand's overseas assets.
These claim estimates will continue to be revised as the insurance industry provides us with updated information.
Record-high dairy volumes drive goods surplus upwards
All quarterly references are to seasonally adjusted numbers unless otherwise stated.
The goods balance was a surplus of $1,066 million in the December 2011 quarter, $523 million higher than the September 2011 surplus. Exports of goods increased $570 million in the latest quarter; imports also increased – up $47 million.
Dairy products were the main driver behind the increase in the value of goods exports. This was due to increasing volumes, reflecting strong growing conditions for dairy farmers. The value of dairy exports was at its highest level since the series began.
The value of goods exports increased in most other categories this quarter. See the Overseas Merchandise Trade: December 2011 release for more details.
High volumes of capital goods increase imports
Capital goods were behind the increase in goods imports in the December 2011 quarter. This was mainly due to an increased volume of transport equipment, which included NH90 military helicopters and other aircraft. Transport equipment is not seasonally adjusted.
Intermediate goods also increased this quarter, due to an increase in fertilisers, while consumption goods decreased, led by durables (eg household appliances).
Services deficit falls as overseas visitor spending rises
The seasonally adjusted balance on services was a deficit of $199 million, down $84 million from the September 2011 quarter deficit. The smaller deficit was mainly due to an increase in spending by overseas visitors in New Zealand.
Rugby World Cup boosts visitor numbers
Spending by overseas visitors to New Zealand was up $64 million in the December 2011 quarter. Visitor numbers increased, but their length of stay fell from the September quarter. The impact of the 133,200 visitors to New Zealand for the Rugby World Cup is mainly captured in the December 2011 quarter, since spending from all visitors is measured in the quarter they depart the country.
Comparing unadjusted numbers, spending by international visitors was up $141 million from the December 2010 quarter. Spending by visitors from the United States, United Kingdom, and Australia all increased from the same time last year, but spending by Japanese visitors fell sharply following natural disasters in both New Zealand and Japan.
Exports of movie production services up, but business services down
Overall, exports of services rose $38 million in the December 2011 quarter. Personal, cultural, and recreational services exports rose $27 million in the latest quarter, driven by earnings from movie production services. However, there was an offsetting fall in exports of business services.
New Zealanders spend less overseas
New Zealand travellers abroad spent $14 million less in the December 2011 quarter than in the previous quarter. There was an increase in the overall number of traveller departures this quarter, influenced by a change in the timing of school holidays during the December 2011 quarter because of the Rugby World Cup. However, spending by New Zealand travellers abroad is estimated using the number of New Zealanders over 15 years returning from overseas travel, which fell this quarter.
Imports of services fell $46 million in the December 2011 quarter. This was mainly due to lower imports of royalties and licence fees. This includes part of the tournament hosting fee for the Rugby World Cup, which was split between the September and December 2011 quarters.
Year-end trade in services deficit falls
The balance on services in the December 2011 year was a deficit of $1.0 billion, compared with a $1.1 billion deficit for the September 2011 year. This improvement follows six consecutive quarters of decline and was mainly due to increased visitor spending in the latest two quarters, resulting from the Rugby World Cup.
Lower earnings by overseas investors drives decrease in income deficit
The income deficit fell $138 million to a deficit of $2,837 million in the December 2011 quarter. This fall was mainly due to lower earnings by foreign investors on their investments in New Zealand. Income from New Zealand investments overseas was relatively stable.
Dividends and profits earned by foreign investors fall
Income from foreign investment in New Zealand fell $132 million, to $4,251 million in the December 2011 quarter. Dividends received by foreign portfolio investors from their New Zealand shares decreased $66 million, while profits earned by foreign investors from their New Zealand subsidiaries were down $61 million.
The fall in profits was driven by the corporate sector. Banking sector profits remained stable, following an increase in the previous quarter.
Profits from New Zealand-owned subsidiaries abroad increase
Income from New Zealand investments overseas increased $23 million in the December 2011 quarter.
New Zealand earned $269 million in profits on its overseas subsidiaries, an increase of $85 million from the September 2011 quarter. Of these profits, $638 million was withdrawn to New Zealand as dividends, causing a corresponding fall in earnings reinvested overseas.
Partly offsetting these increased profits was an $83 million decrease in dividends received by New Zealand portfolio investors from their shareholdings in overseas companies.
Little change in year-ended income deficit
There was little change in the year ended December 2011 deficit when compared with the year ended September 2011. Income from New Zealand investment abroad and income from foreign investment in New Zealand increased by a similar amount, with little net effect on the investment income balance.
Current transfers deficit continues to decrease
In the December 2011 quarter, the balance on current transfers was a deficit of $62 million, down $16 million from the September 2011 quarter deficit.
Non-resident withholding tax received and personal transfers both up
Inflows of current transfers to New Zealand increased $17 million.
- General government current transfers increased, as non-resident withholding tax received was up.
- Other sector current transfers were up, following an increase in personal transfers.
Outflow of current transfers from New Zealand remained flat during the quarter.
- General government current transfers were up, driven by an increase in foreign aid.
- Non-life insurance transfers were down.
Year-ended current transfers deficit widens
The balance of current transfers was a deficit of $364 million for the year ended December 2011, higher than the $39 million deficit in the December 2010 year.
Inflows of current transfers to New Zealand decreased $98 million over this time, due to a drop in non-resident withholding tax received.
Outflows of current transfers from New Zealand rose $227 million, primarily driven by a rise in non-life insurance transfers. This was caused by higher reinsurance premiums paid by insurance companies, following the Canterbury earthquakes.
Capital account deficit narrows
In the December 2011 quarter, the balance on the capital account was a deficit of $114 million, following a deficit of $133 million in the September 2011 quarter.
Insurance claim estimates relating to the Canterbury earthquakes were revised this quarter. These claims are recorded in the capital account for the period in which the earthquakes occurred. For more information on these revisions, please see the 'earthquake-related figures revised' section in data quality.
Migrants bringing more money into New Zealand
Despite migrant arrivals falling 8.9 percent (which is a seasonal pattern), inflows of capital transfers to New Zealand were up $12 million from the September 2011 quarter, to $283 million in the December 2011 quarter. This was mainly due to an increase in the number of older migrants (who we assume to be wealthier) moving to New Zealand from abroad.
Fewer New Zealanders moving abroad
Outflows of capital transfers from New Zealand were $396 million in the December 2011 quarter. Overall migrant departures decreased 5.2 percent in the latest quarter.
First annual net-outflow of migrants in 10 years
For the year ended December 2011, annual net migration figures were negative for the first time since the year ended September 2001. This mainly reflects high departure numbers over the latest year following the Canterbury earthquakes. These departures increased New Zealand's migrant transfers deficit.
Divestments in assets and liabilities result in a net $2.2 billion inflow
The net inflow of investment into New Zealand in the December 2011 quarter resulted from a $8.4 billion withdrawal of New Zealand investment from overseas, partly offset by a $6.1 billion withdrawal of foreign investment from New Zealand. The last time there were significant divestments on both sides of the financial account was in the December 2008 quarter.
Official sector withdraws offshore investment
Driving the withdrawal of New Zealand investment abroad were:
- the official sector (New Zealand Treasury and the Reserve Bank) drawing down $4.8 billion of overseas reserves
- a $1.8 billion withdrawal of deposits from abroad by New Zealand fund managers and banks
- a $1.5 billion decrease in loan lending abroad, mainly by New Zealand banks
- a $1.1 billion settlement of earthquake reinsurance claims, reducing the accounts receivable asset balance.
These transactions (which reduced investment abroad) were party offset by a $1.8 billion increase in New Zealand direct investment abroad. This was driven by increased lending by New Zealand companies to their overseas subsidiaries.
Portfolio investment abroad had little net effect on the financial account. A sale of overseas shares held by New Zealand investment funds (some of which was linked to the settlement of earthquake claims) was offset by investment in overseas debt securities, mostly by government sector funds.
Banking sector reduces overseas debt, government bonds mature
The main features of the $6.1 billion withdrawal of foreign investment from New Zealand were:
- a $5.9 billion divestment of foreign portfolio investment from New Zealand as foreign investors reduced their holdings of bank and government-issued debt securities
- New Zealand banks reducing deposit liabilities abroad by $1.1 billion
Partly offsetting these divestments was a net $0.8 billion of direct investment in New Zealand. This was a result of overseas investors reinvesting earnings into their New Zealand subsidiaries. A rise in direct equity investment by foreign investors was offset by a corresponding fall in lending.
Foreign portfolio investors purchased a net $461 million of New Zealand company shares. This featured several high-profile initial public offerings listed during the quarter, such as Chorus Ltd and Trade Me Group Ltd.
Net international liability position remains flat
This section discusses the presentation of New Zealand's international assets and liabilities, as shown in tables 11–14.
At 31 December 2011, New Zealand's net international liabilities were $147.0 billion, up $0.7 billion from 30 September 2011. The increase in the net liability position arose from net financial account transactions of $2.2 billion, partly offset by net valuation changes of $1.5 billion. New Zealand's net international liabilities were 71.9 percent of GDP at 31 December 2011, compared with 72.0 percent of GDP at 30 September 2011.
Reinsurance claims still affect net liability position
Total outstanding claims on overseas reinsurers for the Canterbury earthquakes were estimated to be $12.7 billion at 31 December 2011. If these accounts receivable assets are excluded, New Zealand's net international liability position at 31 December 2011 would be $159.7 billion (78.1 percent GDP), and $160.1 billion (78.8 percent GDP) at 30 September 2011.
Net international debt flat as both lending and borrowing fall
The net international debt position remained relatively unchanged from 30 September 2011, as a significant fall in lending was offset by a fall in borrowing from abroad.
The official sector changed from a net lending position of $0.4 billion in September 2011 to a $3.5 billion net borrowing position at 31 December 2011. This was mainly due to a decrease in reserve assets, which was partly offset by a fall in government borrowing. Foreign investors reduced their holdings of New Zealand Government debt securities by a net $2.1 billion.
Excluding the impact of Canterbury earthquake reinsurance claims, the net borrowing position of the official sector would be $8.0 billion at 31 December 2011.
Net debt of the banking sector fell $2.3 billion from 30 September 2011. This was due to a decrease in borrowing by the banking sector, which was partly offset by a fall in lending.
Increasing equity liabilities drive net equity position
The net equity position remained in a liability position for the second consecutive quarter, increasing to $1.3 billion. Foreign investors injected equity into New Zealand companies, while New Zealand investors withdrew equity from overseas companies.
External debt decreases
New Zealand's external debt, which excludes the value of financial derivatives, was $146.2 billion (71.5 percent GDP) at 31 December 2011. This is a decrease of $1.2 billion from September 2011 and $5.1 billion from December 2010. The differences between international and external debt are explained further in the data quality section of this release.
Overseas share indexes increase
This section explains the reconciliation statements shown in tables 16 and 17. The main features of the valuation changes from 30 September 2011 to 31 December 2011 were:
- market price changes decreased net liabilities by $2.8 billion. Sharemarket indexes were up in the countries where New Zealand's equity investments are primarily held, and New Zealand market prices fell during the December 2011 quarter
- exchange rate changes increased net liabilities by $0.3 billion, following a general appreciation of the New Zealand dollar
- financial derivative valuation changes increased net liabilities by $1.6 billion. The value of asset positions was down $4.6 billion, while the value of liability positions was down $3.0 billion.
For more detailed data see the Excel tables in the 'Downloads' box.