New Zealand’s current account deficit, which measures the difference between what a country earns from overseas and what it spends, has shown signs of improvement but remains at levels deemed unsustainable by economists.
Statistics NZ has reported that New Zealand’s current account deficit for the year ending September 2024 was $27.0 billion, a decrease from a revised $27.6 billion for the year ending June 2024.
Consequently, the deficit now accounts for 6.4% of GDP, down from 6.6% in the June quarter.
The account deficit in New Zealand peaked at 9.2% of GDP in 2022 and has been gradually declining since that time. Despite this positive trend, the deficit remains a concern for economists and credit rating agencies.
While economists anticipate a gradual reduction in New Zealand’s current account deficit over time, the gap between what the country spends and earns internationally has caught the attention of credit rating agencies. These agencies have previously indicated that they expect to see a decrease in the deficit; otherwise, there may be implications for the review of the country’s sovereign debt ratings.
New Zealand continues to maintain a net international investment liability position, reflecting the difference between its financial assets and liabilities with the rest of the world.
As of September 30, 2024, New Zealand’s net international investment liability position was $208.6 billion, representing 49.5% of GDP. This figure marks an increase of $5.7 billion from the $202.9 billion recorded at the end of June 2024, which was 48.3% of GDP.
“Increases in share prices along with borrowing from and lending to overseas largely contributed to New Zealand’s international liabilities reaching $613 billion and assets reaching $405 billion, which were new highs,” Stats NZ’s international accounts spokesperson Viki Ward said.