Purpose
This paper provides information and aids interpretation of a range of statistics produced by Statistics New Zealand, that are of particular relevance during the current financial market turmoil. The main focus of this paper is statistics about New Zealand's borrowing from abroad (overseas debt).
Introduction to international financial asset and liability statistics
New Zealand's international investment position statistics measure New Zealand's assets and liabilities with the rest of world. New Zealand's overseas assets are comprised of lending overseas and investing in overseas company's shares. Conversely its liabilities are comprised of borrowing from overseas (debt) and foreign investment in New Zealand company shares (equity). Statistics New Zealand publishes these statistics as part of the balance of payments (BOP) and international investment position (IIP) statistics. These statistics are published each quarter, about 10 -12 weeks after the end of the reference period. Data is collected by survey each quarter from private and public sector entities which have international financial transactions and balances.
New Zealand's overseas debt is large in relation to the size of its economy. At 30 June 2008, New Zealand's overseas debt was $225.9 billion, 126.1 percent of GDP, and overseas lending abroad $77.7 billion, 43.4 percent of GDP. New Zealand's net overseas debt was $148.2 billion, 82.8 percent of GDP, as at 30 June 2008. At the same date, Australia's overseas debt was 96.9 percent of it's GDP, and net overseas debt was 54.2 percent of it's GDP.
Statistics of interest
Statistics about New Zealand's external financial position of interest in the current economic climate are the level of overseas debt, the sectors within the economy that hold the debt, when the debt is due to be repaid, and the currencies the debt is to be repaid in.
1. The level of New Zealand's overseas debt by sector
This is presented in table 1 as New Zealand's international liabilities; borrowing. At 30 June 2008, total borrowing was $225.9 billion. This is overseas debt of all sectors; government and private sectors, bank and non-bank.
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Banks. Registered banks plus other financial sector institutions. Of New Zealand's overseas debt at 30 June 2008, $138.9 billion (61.5 percent) was attributed to the banking sector. Note that the classification of the banking sector used here differs from the Reserve Bank of New Zealand (RBNZ) classification registered bank, a topic discussed later in this paper.
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General government. This comprises the New Zealand Treasury plus other central and local government, and government owned or controlled agencies.
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Monetary authorities.The Reserve Bank of New Zealand. The overseas debt of the general government and monetary authority sectors combined was $17.8 billion at 30 June 2008, 7.9 percent of New Zealand's total overseas debt.
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Other sectors. This comprises all other sectors, and is essentially the non-bank corporate sector. At 30 June 2008, this sector's overseas debt was $69.1 billion, 30.6 percent of the total.
2. The residual maturity of overseas debt
Residual maturity is the time to run until repayment of the debt is due. The data is presented in two tables; in Table 4 at an aggregate level; and in Table 5, disaggregated by the Banking Sector and All Other Sectors.
The statistics show that at 30 June 2008, of New Zealand's overseas debt of $225.9 billion. Of this debt, 37.4 percent, $84.5 billion, was due for repayment within 90 days. Of the $84.5 billion, $58.0 billion was overseas debt of the banking sector.
Because some debt may be intended to be repaid using financial assets (lending), it is useful to note that at 30 June 2008 New Zealand investors had claims over overseas borrowers (i.e. lending abroad) of $77.7 billion. Of this, 52.7 percent, $41.0 billion, was due for repayment within 90 days; of this $5.9 billion was lending abroad by the banking sector.
3. The currencies in which overseas debt is to be repaid
This is presented in table 3. Overseas debt can be repayable in domestic currency (NZD), or foreign currency. At 30 June 2008, of New Zealand's $225.9 billion of overseas debt, $114.1 billion (50.5 percent) was repayable in foreign currencies. For measurement in the statistics, foreign currency amounts are converted into NZD at exchange rates as at the survey date. At 30 June 2008, New Zealand's main foreign currency borrowings were, expressed as NZD equivalents; USD $66.0 billion, AUD $16.9 billion, GBP $11.6 billion, and the Euro, $9.7 billion.
Managing exchange rate risk; statistics about hedging
Liabilities repayable in foreign currency are subject to exchange rate risk. For example, if the NZD depreciates against the USD, then the amount of NZD required to settle the USD debt increases. This exchange rate risk can be managed (hedged) in various ways:
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Financial derivative contract. Generally speaking, these are contractual arrangements which enable transactors to manage various risks. To manage exchange rate risk for example, an entity with a USD debt may enter a contract with a third party to supply USD in exchange for NZD at an agreed rate of exchange at a specified future date.
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Balance sheet assets. For example matching USD borrowing and lending.
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Expected receipts. For example an exporter who receives payments for exports in USD may have USD debt.
Statistics about hedging of New Zealand's overseas debt denominated in foreign currencies are produced annually, as at 31 March (Tables 6 and 7). At 31 March 2008, 92.2 percent of New Zealand's external debt denominated in foreign currencies was hedged in some way.
Differences between Statistics New Zealand and RBNZ data about banks' external positions
The RBNZ's figure for New Zealand registered banks funding from abroad, as at 30 June 2008, is $119.5 billion. The Statistics New Zealand figure for the banking sectors overseas debt at the same date is $138.9 billion.
The $19.4 billion difference is due to differences in compilation methodologies. The RBNZ figure is at the registered banks level, whereas the Statistics New Zealand figure is for a broader sectoral grouping, comprising banks plus other financial sector institutions. In addition there may be differences in the classification of some instruments between equity and debt.
Each agency collects and publishes statistics within a particular context. The RBNZ's context is of monetary policy requirements and financial system overview. For Statistics New Zealand it is the compilation of balance of payments and international investment position statistics consistent with an International Monetary Fund (IMF) methodology (the Balance of Payments Manual, Fifth Edition, 1993). Meeting the IMF standards assures users of the integrity of the statistics and facilitates international comparability of statistics. This can be important when, for example, a country's bank and non-bank enterprises seek to raise funds on international capital markets, and when foreign investors are assessing the country risk of potential borrowers.
Further information
Peter Roche
Statistical Analyst
Balance of Payments
Statistics New Zealand
Phone: (04) 931 4600
Email: bop.surveys@stats.govt.nz