Better-than-expected BoP figures give Robertson something to bray about – but revisions helped, and the deficit is still troubling
The latest balance of payments statistics – providing a broad measure of what the country earns and spends internationally – gave grist to Finance Minister Grant Robertson’s publicity mill today.
The current account deficit narrowed to 7.5 per cent of GDP in the June year compared with 8.2 per cent of GDP in March.
That’s still perturbingly high, but the headline on Robertson’s press statement highlighted the strong export boost which he said was supporting New Zealand’s economic growth,
“… adding to signs that the economy has turned a corner and is on a stronger footing as we rebuild from Cyclone Gabrielle and lock in the benefits of multiple new trade deals…”
The current account deficit had narrowed further thanks to stronger exports of kiwifruit and dairy products and the return of overseas visitors adding to export receipts, Grant Robertson said.
The result was better than the 8.1 per cent of GDP that Treasury had forecast in the Pre-election Fiscal and Economic Update, he noted.
True, the magnitude of the narrowing of the deficit has surprised the forecasters – but revisions account for much of this surprise.
“Indeed, revisions were made to all three prior quarters included in the annual deficit calculation and totalled $1.1bn,” Westpac economists commented.
But Robertson was keen to cash in politically:
“The economy has turned a corner and the narrowing deficit helps protect New Zealand in what is a deteriorating global economy.”
Perhaps his colleagues were fired up by the result, because after they had spend several days with nothing to declare – at least, not on the government’s official website – today the statements flowed generously.
They were spending, too.
Immigration Minister Andrew Little announced more support for the victims of migrant exploitation (and of a shameful failure of officials to adequately police the country’s immigration rules).
Little did not tell us how much this would cost.
The PM announced the government has approved funding of $15 million for flood resilience work in Te Karaka.
Cyclone Recovery Minister Kieran McAnulty and Regional Development Minister Barbara Edmonds announced further government support to help businesses recover from Cyclone Gabrielle and attract more people back into their regions.
The $10 million package targets nine projects which will support economic recovery in Hawke’s Bay, Tairāwhiti and Northland.
Defence Minister Andrew Little turned the first sod to start construction of a new maintenance support facility at Burnham Military Camp.
He didn’t disclose the cost but he did say this is one of nine major logistics projects to be delivered as part of the Defence Estate Regeneration Programme over the next five years and total $224 million.
And then there was the news that Foreign Minister Nanaia Mahuta will be representing New Zealand at the 78th Session of the United Nations General Assembly in New York this week, before visiting Washington DC for further Pacific focussed meetings.
This will take her off the campaign trail for a few days while enabling the PM to stay on, because she will be in New York from Wednesday 20 September,
“… and will participate in UNGA leaders engagements on behalf of Prime Minister Chris Hipkins.”
“… adding to signs that the economy has turned a corner and is on a stronger footing as we rebuild from Cyclone Gabrielle and lock in the benefits of multiple new trade deals…”
The current account deficit had narrowed further thanks to stronger exports of kiwifruit and dairy products and the return of overseas visitors adding to export receipts, Grant Robertson said.
The result was better than the 8.1 per cent of GDP that Treasury had forecast in the Pre-election Fiscal and Economic Update, he noted.
True, the magnitude of the narrowing of the deficit has surprised the forecasters – but revisions account for much of this surprise.
“Indeed, revisions were made to all three prior quarters included in the annual deficit calculation and totalled $1.1bn,” Westpac economists commented.
But Robertson was keen to cash in politically:
“The economy has turned a corner and the narrowing deficit helps protect New Zealand in what is a deteriorating global economy.”
Perhaps his colleagues were fired up by the result, because after they had spend several days with nothing to declare – at least, not on the government’s official website – today the statements flowed generously.
They were spending, too.
Immigration Minister Andrew Little announced more support for the victims of migrant exploitation (and of a shameful failure of officials to adequately police the country’s immigration rules).
Little did not tell us how much this would cost.
The PM announced the government has approved funding of $15 million for flood resilience work in Te Karaka.
Cyclone Recovery Minister Kieran McAnulty and Regional Development Minister Barbara Edmonds announced further government support to help businesses recover from Cyclone Gabrielle and attract more people back into their regions.
The $10 million package targets nine projects which will support economic recovery in Hawke’s Bay, Tairāwhiti and Northland.
Defence Minister Andrew Little turned the first sod to start construction of a new maintenance support facility at Burnham Military Camp.
He didn’t disclose the cost but he did say this is one of nine major logistics projects to be delivered as part of the Defence Estate Regeneration Programme over the next five years and total $224 million.
And then there was the news that Foreign Minister Nanaia Mahuta will be representing New Zealand at the 78th Session of the United Nations General Assembly in New York this week, before visiting Washington DC for further Pacific focussed meetings.
This will take her off the campaign trail for a few days while enabling the PM to stay on, because she will be in New York from Wednesday 20 September,
“… and will participate in UNGA leaders engagements on behalf of Prime Minister Chris Hipkins.”
Latest from the Beehive
20 SEPTEMBER 2023
The Government will provide a temporary package of further support to exploited migrant workers and strengthen immigration rules to prevent migrant exploitation, Immigration Minister Andrew Little says.
An export boost is supporting New Zealand’s economy to grow, adding to signs that the economy has turned a corner and is on a stronger footing as we rebuild from Cyclone Gabrielle…
The Government has approved $15 million to raise about 200 homes at risk of future flooding.
The Government is helping businesses recover from Cyclone Gabrielle and attract more people back into their regions.
Defence Minister Andrew Little has turned the first sod to start construction of a new Maintenance Support Facility (MSF) at Burnham Military Camp today.
19 SEPTEMBER 2023
Foreign Minister Nanaia Mahuta will represent New Zealand at the 78th Session of the United Nations General Assembly (UNGA) in New York this week, before visiting Washington DC further Pacific-focussed meetings.
Grant Robertson enthused about the balance of payments figures, declaring:
“The economy has turned a corner and the narrowing deficit helps protect New Zealand in what is a deteriorating global economy.”
The improvement was due to a goods exports surplus of $442 million in the June quarter, driven by increases in kiwifruit and dairy products, he said.
The return of greater numbers of overseas visitors is also boosting incomes in the tourism, accommodation, and hospitality sectors.
He noted that New Zealand’s net international liability position stood at 47.8 per cent of GDP in June, which was below the 49.9 per cent of GDP forecast in PREFU.
“The current Government inherited net international liabilities above 50 per cent of GDP in 2017. To get through the pandemic with our net international liabilities remaining lower than ‘the rockstar years’ shows strong economic and fiscal management through tough times.”
Inevitably, Robertson grabbed the chance for some electioneering:
“We know recent years have been tough for many working New Zealanders. But as the economy hits a turning point, the outlook is positive. The Treasury is forecasting average annual growth of 2.6 percent over the next four years, 100,000-plus extra jobs, and wages to outpace inflation, taking pressure off the cost of living for households.
“We are continuing to invest in an export led economy that delivers higher wage jobs. Free trade agreements now cover almost three quarters of New Zealand’s exports, up from less than half six years ago – we are seeing the benefits of these deals flow through.”
In their commentary, ANZ economists said
Source: ANZ
The return of greater numbers of overseas visitors is also boosting incomes in the tourism, accommodation, and hospitality sectors.
He noted that New Zealand’s net international liability position stood at 47.8 per cent of GDP in June, which was below the 49.9 per cent of GDP forecast in PREFU.
“The current Government inherited net international liabilities above 50 per cent of GDP in 2017. To get through the pandemic with our net international liabilities remaining lower than ‘the rockstar years’ shows strong economic and fiscal management through tough times.”
Inevitably, Robertson grabbed the chance for some electioneering:
“We know recent years have been tough for many working New Zealanders. But as the economy hits a turning point, the outlook is positive. The Treasury is forecasting average annual growth of 2.6 percent over the next four years, 100,000-plus extra jobs, and wages to outpace inflation, taking pressure off the cost of living for households.
“We are continuing to invest in an export led economy that delivers higher wage jobs. Free trade agreements now cover almost three quarters of New Zealand’s exports, up from less than half six years ago – we are seeing the benefits of these deals flow through.”
In their commentary, ANZ economists said
- New Zealand’s net international liability position widened just $140m from Q1 to a still-whopping $189.34bn in Q2. As a share of GDP it narrowed 0.9ppt to 47.8%, consistent with relatively robust growth in the nominal economy. Further, these ratios suggest tomorrow’s Q2 GDP data will include some upwards revisions to the nominal economy. But the signal here on how much of that is price vs volume driven is not clear.
- While the narrowing current account deficit is welcome news, New Zealand’s external accounts remain severely out of balance and well beyond sustainable levels. From this starting position, New Zealand is still vulnerable to a terms of trade shock and/or drought that could result in unsustainable deficits sticking around for too long.
Source: ANZ
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The ANZ economists concluded that – all else equal – New Zealand’s severe external imbalance continues to hint at a risk of a change in the mix of monetary conditions, namely a weaker NZD and higher interest rates (via a widening risk premium).
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
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