• Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+
Balance of Payments and International Investment Position: September 2011 quarter
Embargoed until 10:45am  –  21 December 2011
Commentary

Overview of the September 2011 quarter

Current account deficit increases 

New Zealand's seasonally adjusted current account balance for the September 2011 quarter was a deficit of $2.7 billion. This is $0.7 billion larger than the June 2011 quarter deficit.

Key movements in the September 2011 quarter were:

  • the goods surplus fell $513 million
  • the income deficit rose $380 million
  • the services deficit fell $112 million
  • the current transfers deficit fell $72 million.

Graph, Balance on current account, quarterly, September 2002 to September 2011.

Exports of goods down, while banks' earnings increase

The lower surplus on trade in goods this quarter was mainly caused by lower prices for meat, dairy products, and logs. Imports of goods also decreased, mainly due to the lower value of petroleum and petroleum product imports.

The higher income deficit was mainly due to increased profits for the overseas-owned banking sector.

The lower services deficit was mainly due to increased travel service exports. The number of overseas visitors to New Zealand increased over the quarter, due to the Rugby World Cup.

Banks increase borrowing, overseas sharemarkets fall   

The financial account recorded a net investment inflow of $7.1 billion in the September 2011 quarter. The banking sector increased borrowing from overseas this quarter, after reducing borrowing in the previous three quarters. Foreign investors continued to buy government-issued debt securities.

At 30 September 2011, New Zealand's net international liabilities were $148.2 billion (72.9 percent of GDP), compared with $138.4 billion (69.0 percent of GDP) at 30 June 2011. This increase in the net liability position is mainly due to more borrowing by the banking sector. In addition, falling overseas sharemarkets decreased the market value of New Zealand's equity investments abroad by $4.1 billion.

Falling services balance drives increase in year-ended current account deficit  

The current account balance for the September 2011 year was a deficit of $8.7 billion (4.3 percent of GDP), compared with the $6.6 billion (3.5 percent of GDP) deficit for the September 2010 year.

The increase in the deficit was due to falling balances across all components, featuring:

  • a $1,080 million turnaround in the services balance, from a surplus to a deficit
  • the income deficit increasing by $426 million
  • a $353 million turnaround in the transfers balance, from a surplus to a deficit
  • the goods surplus decreasing by $196 million.

Revised reinsurance claims and settlements this quarter

Revised reinsurance claim estimates 

Statistics New Zealand has received updated information on the amount of total reinsurance claims from non-residents for the September 2011 quarter. See the table below for details.

Revised reinsurance claim estimates 
Quarter

Previously published reinsurance claims

Revised reinsurance claims

Size of revision

Total outstanding claims at end of period

 

$NZ(million)

Sep 2010

3,297

3,866

569

3,866

Dec 2010

0

0

0

3,866

Mar 2011

8,541

9,321

780

13,129

Jun 2011

680

862

182

13,404

Sep 2011

0

0

0

12,669

These claim estimates will continue to be revised as the insurance industry provides us with updated information.

Further reinsurance claims settled this quarter 

Overseas insurance companies settled $735 million of reinsurance claims relating to the 2010/11 Canterbury earthquakes during the September 2011 quarter. This brings the total amount settled for all three major quakes to $1,380 million.

As claims are settled they are recorded as trade credits in the financial account, as a flow reducing New Zealand's overseas assets. Outstanding reinsurance claims (total claims less total settlements) remain in New Zealand's international investment position statistics as an asset.

Current account deficit trend continues to widen

The current account deficit trend increased to $2.6 billion in the September 2011 quarter, from $1.9 billion last quarter. This continues a widening trend that began in the December 2009 quarter.

Graph, Component trend balances, quarterly, September 2002 to September 2011.

Lower exports drive goods surplus downwards

All quarterly references are to seasonally adjusted numbers unless otherwise stated.

The goods balance was a surplus of $481 million in the September 2011 quarter, $513 million lower than the June 2011 quarter surplus. Exports of goods decreased $615 million in the latest quarter; imports also decreased – down $100 million.

The merchandise terms of trade fell 0.7 percent in the September 2011 quarter, but still remain at a very high level. The fall was due to export prices falling by more than import prices.

Meat products, dairy products, and pinus radiata logs were behind the decrease in goods exports, mainly due to falling prices. The fall in exports is a turnaround from three consecutive quarters of rises.

Lower volumes of petroleum products imported 

Petroleum and petroleum products were behind the decrease in imports of goods in the September 2011 quarter, mainly due to a fall in volumes. Prices were also down slightly. Food and beverage imports increased during the quarter.  

Graph, Seasonally adjusted goods, quarterly, September 2002 to September 2011.

Year-end goods balance down for the first time since December 2008 

For the year ended September 2011, the goods balance was a surplus of $3.0 billion, down $0.2 billion from the September 2010 year surplus.

A $5.4 billion rise in the value of goods imports in the September 2011 year was due to higher prices for petroleum and petroleum products and increased volumes of transport equipment.

A $5.2 billion rise in the value of goods exports was mainly due to higher prices of dairy products.  

Small decrease in services deficit as the Rugby World Cup kicks off

In the September 2011 quarter, the seasonally adjusted balance on services was a deficit of $290 million, compared with a $402 million deficit in the June 2011 quarter. The lower deficit was due to increases in exports of travel and transportation services.

Rugby World Cup attracts visitors to New Zealand 

Exports of services were up $182 million for the latest quarter. This was mainly due to an increase in visitor numbers to New Zealand, which contributed to:

  • spending by overseas visitors while staying in New Zealand rising $62 million (3.7 percent)
  • increasing overseas ticket sales of New Zealand-resident airlines.

The Rugby World Cup 2011 began in the September 2011 quarter and drew 80,000 visitors to New Zealand in that quarter, according to international travel and migration statistics. Overseas visitors' expenditure is recorded in the quarter that they leave New Zealand. This may be a different quarter to when they arrive in New Zealand.

For information about the tournament, please see Treatment of the 2011 Rugby World Cup in New Zealand’s balance of payments and national accounts.

Tournament hosting costs cause rise in imports  

Imports of services rose $71 million in the September 2011 quarter, driven by a $75 million increase in royalties and license fees paid (not seasonally adjusted). This includes tournament hosting and broadcast fees related to the Rugby World Cup.

Spending by New Zealand visitors abroad fell by $14 million in the latest quarter. This is the first significant fall in imports of travel services since the June 2009 quarter – it was due to fewer New Zealanders leaving the country on holiday during the September 2011 quarter.

Graph, Seasonally adjusted services, quarterly, September 2002 to September 2011.

Year-end trade in services now a deficit 

The balance on services in the September 2011 year was a deficit of $1,078 million, a turnaround from the September 2010 year's surplus. This change was driven by a smaller travel surplus and increased imports of business services.

Banks profits drive rise in income deficit 

The income deficit was $2,825 million in the September 2011 quarter, $380 million larger than the June 2011 quarter deficit. Foreign investors earned $4,220 million from their New Zealand investments, and income earned from New Zealand investment abroad increased to $1,395 million.

Foreign investors' equity income up as banks' earnings increase

There was a $441 million increase in foreign investors' earnings from New Zealand this quarter, mainly due to overseas-owned banks making higher profits. In addition, overseas portfolio shareholders received higher dividend payments from New Zealand companies.

New Zealand fund managers earn more from overseas  

New Zealand's earnings from overseas investments increased $56 million in the latest quarter. This was mainly due to higher interest and dividends earned by New Zealand fund managers from their portfolio investments. Total portfolio investment increased $90 million as:

  • interest earned from owning overseas-issued debt securities rose $52 million
  • dividends received from shares in overseas companies rose $38 million.

This was partly offset by a fall in profits earned by New Zealand-owned companies overseas, and less interest being earned from lending abroad.

Graph, Balance on income, quarterly, September 2002 to September 2011.

Larger year-ended income deficit 

The year ended September 2011 income deficit was $10.3 billion, $0.4 billion larger than the year ended September 2010 deficit.

Earnings by foreign investors from New Zealand, and by New Zealand investors from abroad, both featured rises in dividends and interest income. However, lower company profits caused direct investment income to fall on both sides of the account.

Current transfers deficit falls 

In the September 2011 quarter the balance on current transfers was a deficit of $73 million, a $72 million smaller deficit than in the June 2011 quarter.

Non-resident withholding tax received up, while foreign aid payments fall 

Current transfers into New Zealand rose $16 million, mainly due to a rise in general government current transfers – non-resident withholding tax received was up $15 million.

Current transfers out of New Zealand fell $56 million, driven by:

  • a fall in general government current transfers, as foreign aid decreased
  • a fall in non-life insurance transfers – down $8 million, but remaining at a high level following increases in reinsurance premiums paid after the Canterbury earthquakes.

Year-ended current transfers now in deficit  

In the September 2011 year, the balance on current transfers was a deficit of $329 million, compared with a surplus of $24 million in the September 2010 year.

Current transfers into New Zealand were down $217 million during the year, primarily driven by a drop in non-resident withholding tax received.

Current transfers out of New Zealand were up $136 million during the same period. The increase was affected by:

  • non-life insurance transfers
  • other sector other transfers.

Capital account returns to deficit

In the September 2011 quarter, the capital account balance was a deficit of $133 million, following a surplus of $698 million in the June 2011 quarter. The June quarter featured large reinsurance claims arising from the Canterbury earthquakes.

Excluding the reinsurance flows from the June 2011 quarter, the capital account balance was a $164 million deficit for that quarter.

For information about the classification of reinsurance claims, please read Revised treatment of the Canterbury earthquakes' insurance claims in New Zealand's international and national accounts.

More New Zealand citizens returning home after living abroad

Inflows of capital transfers to New Zealand featured an increase in migrant transfers in the September 2011 quarter. This was due to a seasonal increase in migrant arrival numbers, up 37.2 percent this quarter, driven by New Zealand citizens returning home after living abroad.

Fewer people moving to Australia

Outflows of capital transfers from New Zealand were $404 million, down $14 million from the June 2011 quarter. There was a fall in the overall number of departing migrants in the latest quarter, mainly driven by fewer people moving to Australia. Although migrant departures fell, they remain at a high level.

Net $7.1 billion inflow in the financial account

The net inflow of investment to New Zealand in the September 2011 quarter resulted from a $7.7 billion inflow of foreign investment into New Zealand and a $0.6 billion outflow of New Zealand investment overseas.

Foreign investment into New Zealand reflects borrowing from overseas

The inflow of foreign investment into New Zealand was primarily in the form of portfolio and other investment. By sector, the main features were:

  • a net $5.3 billion of New Zealand banking sector funding from abroad, mainly debt securities and loans
  • a net $2.8 billion of government-issued debt securities were purchased by foreign investors.

Foreign direct investment in New Zealand in the latest quarter was a net $0.4 billion. Inflows resulting from merger and acquisition activity and outflows from capital repatriations left retained earnings as the primary contribution.

New Zealand invests abroad in overseas shares

The major contributions to the outflow of New Zealand investment abroad were:

  • $2.2 billion of New Zealand portfolio investment abroad – the main feature was New Zealand fund managers investing in overseas company shares
  • $0.6 billion of New Zealand direct investment abroad – the main contributions were New Zealand-parent companies lending to, and retaining profits in, their overseas subsidiaries.

These transactions increasing investment abroad were party offset by transactions reducing New Zealand investment abroad:

  • $1.7 billion withdrawal of other investment abroad – the main features were $0.7 billion of settlements for outstanding Canterbury earthquake reinsurance claims, and New Zealand banks reducing their loans to overseas
  • the official sector (New Zealand Treasury and Reserve Bank) divested $0.4 billion of reserve assets from abroad.

Net international liability position increases

This section discusses the presentation of New Zealand's international assets and liabilities, as shown in tables 11–14.

At 30 September 2011, New Zealand's net international liabilities were $148.2 billion. This is 72.9 percent of GDP and compares with net liabilities of 69.0 percent of GDP at 30 June 2011.

Reinsurance claims affect net liability position

Total outstanding claims on overseas reinsurers for the Canterbury earthquakes were estimated at $12.7 billion at 30 September 2011. If these accounts receivable assets are excluded, New Zealand's net international liability position at 30 September 2011 would be $160.9 billion (79.1 percent of GDP), and $151.8 billion (75.7 percent of GDP) at 30 June 2011.

Net international debt up as banks borrow more

The rise in the net liability position from 30 June 2011 to 30 September 2011 was due mainly to net international debt, which was up $8.6 billion. International debt featured:

  • bank sector net debt rising $5.1 billion from 30 June 2011, after falling steadily since the June 2010 quarter
  • official sector net lending falling $2.9 billion, to $0.4 billion. The net debt position would be $4.1 billion if we exclude the impact of Canterbury earthquake reinsurance claims in this sector.

Graph, Banking sector net international debt position, quarterly, September 2002 to September 2011.

Graph, Official sector net international debt position, quarterly, September 2005 to September 2011.

Falling overseas sharemarkets drive equity asset values down

The net equity position at 30 September 2011 changed $1.3 billion, from a net asset position to a net liability position. The shift resulted from falls in the value of overseas company shares held by New Zealand investors, which more than offset additional investment in overseas company shares.

External debt increases

New Zealand's net external debt, which excludes the value of financial derivatives, was $149.3 billion (73.4 percent of GDP) at 30 September 2011. This is up $10.6 billion from 30 June 2011 and $0.5 billion from 30 September 2010. The differences between international and external debt are explained in the definitions section of this release.

Reconciling the September 2011 quarter financial account and the international investment position

The $9.9 billion rise in the net international investment position liability position arose from net financial account transactions of $7.1 billion and net valuation changes of $2.8 billion. The main features of these valuation changes from 30 June to 30 September 2011 were:

  • market price changes increased net liabilities by $4.4 billion – sharemarket indexes in the countries where New Zealand's equity investments are primarily held fell significantly
  • exchange rate changes increased net liabilities by $1.0 billion – following a general depreciation of the New Zealand dollar
  • financial derivative valuation changes decreased net liabilities by $3.1 billion – the value of asset positions was up $9.0 billion, while the value of liability positions was up $5.9 billion.

For more detailed data see the Excel tables in the 'Downloads' box.

  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+
Top
  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+