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New Zealand current account deficit up as overseas firms take profits

Xinhua, March 18, 2015 Adjust font size:

New Zealand's current account deficit widened in the quarter ending December last year, as overseas companies took higher profits from the growing economy, the government statistics agency said Wednesday.

The current account the broadest measure of the movement of goods and services across the border went from a deficit of 2.4 billion NZ dollars (1.74 billion U.S. dollars) in the September 2014 quarter to 2.6 billion NZ dollars (1.9 billion U.S. dollars) in the December quarter, according to Statistics New Zealand.

The larger deficit was due to overseas companies earning more from their investments in New Zealand, international statistics manager Jason Attewell said in a statement.

Companies tended to earn higher profits when the economy was growing and an increase in profits earned by foreign-owned companies would increase New Zealand's current account deficit if nothing else changed.

"Most of this quarter's increase in profits earned by foreign- owned companies in New Zealand was reinvested back into the company," Attewell said in a statement.

"In addition, companies were able to pay more dividends to their overseas portfolio shareholders this quarter, reflecting recent growth in the New Zealand economy."

This activity resulted in an increased income deficit, which was partly offset by increased spending by overseas visitors to New Zealand during the December quarter.

The number of overseas visitors to New Zealand was up 5.4 percent from the previous quarter, while expenditure by visitors rose 14.1 percent to 2.82 billion NZ dollars (2.06 billion U.S. dollars).

The annual current account deficit was 7.8 billion NZ dollars ( 5.7 billion U.S. dollars), or 3.3 percent of GDP, in the December year, compared with 6.1 billion NZ dollars (4.46 billion U.S. dollars), 2.6 percent of GDP, for the year ended September 2014.

The increase in the annual deficit was due to a fall in the goods surplus.

"Falling dairy prices contributed to a drop in exports in the last year, while imports of goods increased almost across the board," Attewell said. Endi