New Zealand’s Q2 current account deficit widens larger than estimates; NZD/USD rises ahead of Q2 GDP

New Zealand’s current account deficit widened larger than market expectations during the second quarter of this year. While this was the largest deficit in three years, it is still low relative to history, and remains within the sustainable range, according to the latest report from Westpac Research.

The country’s annual current account deficit increased to 3.3 percent of GDP in June, compared to an average market forecast of 2.9 percent. In seasonally adjusted terms, the current account deficit narrowed to $2.67 billion in the June quarter, with improved results in goods, services and investment income compared to the March quarter.

Further, goods exports benefited from a pickup in both prices and volumes in the June quarter. Spending on imports rose by a lesser degree, largely due to an increase in oil prices. Similarly, exports of services rose by more than imports in the June quarter, led by solid growth in tourist spending.

Despite the widening in the current account deficit, New Zealand’s international position remains on a sustainable path. Net international liabilities were steady at 54.6 percent of GDP, which is the lowest reading for this series dating back to June 2000. Relatively small current account deficits in recent years, and hence a smaller borrowing requirement, have meant that New Zealand has effectively been able to outgrow its debts.

Meanwhile, the NZD/USD currency pair rose 0.27 percent to trade at 0.6601 at the time of writing ahead of New Zealand’s second-quarter gross domestic product (GDP), scheduled to be released today by 22:45GMT.