New Zealand’s Q3 current account deficit narrows to 3.3% of GDP

New Zealand's current account deficit narrowed slightly to 3.3% of GDP in the year to September. The result was in line with the market expectations, after accounting for some positive revisions to the June quarter figures that narrowed the annual deficit by 0.1 percentage points. 

The current account deficit has remained remarkably steady over the last year, despite the steep fall in prices for dairy exports. More favourable prices for other commodities, growth in export volumes, and most importantly a strong rebound in tourist spending, have provided a substantial offset. While the deficit seen widening over the next year as the full impact of low dairy prices flows through, it is expected to remain well-contained relative to previous economic cycles. 

The details of today's release don't provide any further insight into tomorrow's September quarter GDP report. Exports will make a positive contribution to growth, but much of this will come out of inventories. A solid 0.9% increase is expected in GDP, after two quarters of weak growth.