N.Zealand current account deficit at 20-year low

New Zealand's annual current account deficit fell to its lowest level for two decades in the year to March due to the impact of the global economic slowdown, official figures showed Wednesday.

The current account deficit -- a measure of trade and investment flows in and out of a country -- came to 4.5 billion dollars (3.2 billion US) or 2.4 percent of gross domestic product (GDP), Statistics New Zealand (SNZ) said.

This was the lowest deficit since the year to September 1989, and reflected a sharp fall in imports outstripping lower exports and foreign companies earning lower profits in New Zealand, SNZ said.

Another factor was large one-off tax payments by the four largest banks, which are Australian owned, without which the annual deficit would have amounted to 6.1 billion dollars.

The annual deficit was down from a revised 5.3 billion dollars, or 2.9 percent of GDP, in the year to December and 14.6 billion dollars, or 7.9 percent of GDP, in the year to March 2009.

In the three months to March, the current account was in surplus by 200 million dollars -- the first March quarter surplus since 2003 -- as exports started growing again.

"This is the first increase in goods exports for over a year," said SNZ's balance of payments manager John Morris.

"Dairy prices moved significantly," said Morris, referring to New Zealand's largest export industry.

However, economists said the deficit was unlikely to continue improving for much longer.

ASB bank economist Jane Turner said the fall in the annual current account deficit had been dramatic since it peaked at 16 billion dollars in the 2008 calendar year.

"However, much of this shift has been cyclical and a result of recession," Turner said.

"As the economy enters its second year of recovery, it appears the underlying improvement in the current account has peaked."

ANZ bank agreed that the deficit would soon start rising again.

"We believe the trough in the current account deficit is at hand, and that the deficit will start to head towards four percent of GDP by the end of the year as the economy continues to recover," ANZ chief economist Cameron Bagrie said.