Strong export growth narrows current account deficit to $3.0 billion

Services exports rebound following 20-year low

Seasonally adjusted services exports recovered slightly after dropping to a 20-year low in the March 2021 quarter:

• Services exports were worth $4.1 billion in the June 2021 quarter, growing $1.7 billion.
• Travel services exports rose $646 million, partly reflecting an increase to spending by non-residents coming to New Zealand under quarantine-free travel arrangements.

'We can see the effect of quarantine-free travel with Australia and the Cook Islands in the June 2021 quarter. For a short time, we saw more non-residents come into New Zealand and spend on services like hotels, taxis, and tourist attractions,' Mr Allan said.

Travel services exports weren't the only contributor to the services export growth. Other increases included personal, cultural, and recreational services; and other business services.

Services exports remain well below pre-COVID-19 levels, which were worth $6.8 billion in the March 2020 quarter.

Value of transport imports drive services deficit

Seasonally adjusted services imports have steadily grown since the September 2020 quarter:

• Services imports were worth $4.7 billion in the June 2021 quarter, up $440 million.
• Transport services imports rose to $1.0 billion - a similar level to what was seen in the March 2020 quarter ($1.2 billion).

'Increased freight costs and supply chain pressures continue to push the value of transport imports up, ' Mr Allan said.

Overall, New Zealand remained in a services deficit of $557 million in the June 2021 quarter.

Annual current account deficit widens significantly

The annual current account deficit was $11.2 billion in the year ended June 2021 (3.3 percent of GDP), $6.5 billion wider than the year ended June 2020.

The change from a services surplus to a services deficit was the biggest driver of change to the current account. New Zealand has only had an annual services deficit twice in the past 20 years; in the year ended March 2021, and year ended June 2021.

International assets continue to increase

Despite the turmoil of the COVID-19 pandemic, the value of New Zealand's international assets at 30 June 2021 increased by $33.0 billion compared with 30 June 2020. The biggest driver to asset growth was portfolio investment assets, which increased by $49.9 billion.

'Equity and investment fund shares, including things like KiwiSaver funds and the New Zealand Super Fund, experienced a big rise in the value of their assets over the last 12-months. Kiwis are likely to have seen a bit of an increase to their funds over this time period,' Mr Allan said.

Asset growth has outpaced the growth of liabilities, with international liabilities growing $7.1 billion in the last year.

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