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New Zealand Q1 Current Account Deficit NZ$2.6 Billion

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New Zealand posted a seasonally adjusted current account deficit of NZ$2.6 billion in the first quarter of 2019, Statistics New Zealand said on Wednesday - following the NZ$3.256 billion shortfall in the three months prior.

The current account/GDP ratio was down 3.6 percent on year versus expectations for a drop of 3.5 percent after sliding 3.7 percent in the previous quarter.

Seasonally adjusted goods imports were down NZ$76 million and exports up NZ$17 million from the December 2018 quarter, resulting in a narrowing of the goods deficit to NZ$1.1 billion.

The fall in imports was led by intermediate goods, with crude oil the largest contributor to the change. The increase in exports was driven by milk power, butter, and cheese, following a fall in the December 2018 quarter. Logs, wood, and wood article exports were also up.

The seasonally adjusted services surplus narrowed by NZ$120 million to NZ$970 million, with imports rising NZ$85 million and exports falling NZ$36 million. Transportation imports were up NZ$20 million whereas the fall in exports was led by a decrease in spending by visitors to New Zealand, down NZ$26 million from the December 2018 quarter, and transport exports, down NZ$17 million.

Primary income flows between New Zealand and the rest of the world represent income earned from investments and compensation of employees.

The primary income deficit narrowed by NZ$203 million to NZ$2.4 billion, with income from investment abroad up (led by portfolio investment income) combined with a decrease in income from foreign investment in New Zealand.

Investment income from New Zealand investment abroad increased NZ$119 million to NZ$2.4 billion. Income on portfolio investment made up NZ$113 million of this increase which predominantly came from an increase in investment income on equity and investment fund shares. Of the NZ$596 million of portfolio investment income on equity and fund shares, NZ$542 million was paid as dividends on equity.

Investment income from foreign investment in New Zealand decreased NZ$125 million to NZ$4.7 billion. The main driver was a NZ$113 million decrease in direct investment income. Direct investment income on equity and investment fund shares, and interest income were down on last quarter (NZ$77 million and NZ$35 million respectively). Of the NZ$2.4 billion of direct investment income on equity and fund shares, NZ$1.7 billion was returned as dividends while the remainder was reinvested.

The financial account recorded a net investment inflow of NZ$726 million in the March 2019 quarter.

After a recent high in the December 2018 quarter, New Zealand's net liability position (international assets minus liabilities) has decreased by NZ$4.0 billion, to NZ$164.4 billion at 31 March 2019.

The narrowing of the net liability position was mainly due to rises in valuation from net financial derivative changes (NZ$3.2 billion) and net other changes (NZ$2.3 billion).

Market price changes increased liabilities by NZ$6.4 billion, and also increased assets by NZ$5.7 billion resulting in a net market price change of NZ$725 million.

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