File photo. Photo: RNZ / Rebekah Parsons-King
New Zealand's current account deficit has increased to its highest level in 14 years and could be on track to post a record in the not too distant future.
The deficit for the year ended June was $27.8 billion equating to 7.7 percent of gross domestic product, the biggest since 2008.
The current account, otherwise known as the balance of payments, measures the imports and exports of goods and services, the value of foreign assets and liabilities, and capital transfers. Deficits show how much money the country needs to borrow.
"New Zealand has long been used to running external deficits. However, they have rarely gotten as large as they are now," BNZ senior economist Craig Ebert said.
"The overblown external deficit certainly gels with the idea, however, that the New Zealand economy is over-stretched, with merchandise imports exceeding solid levels of merchandise exports."
The Stats NZ data showed the seasonally adjusted deficit for the three months ended June was $7.1b, down $1.7b on the previous quarter as growth in export earnings were driven by better returns for key commodities such as meat and fruits, outpacing the rise in import costs.
The opening of borders and gradual resumption of overseas tourism improved services earnings.
The country's net international liability position, the gap between what New Zealand assets are worth and the cost of our liabilities, increased to $179.3b, from $161.6b in the previous quarter.
Foreign investors continued to earn more from their New Zealand assets -- $5.2b -- than New Zealand earned from its overeas investments at $2.4b.
Ebert said the country's indebtedness was not as bad as at the time of the Global Financial Crisis, however it has been rising and the bigger investment deficit reflected falls in the value of assets that had risen when the pandemic hit.
"The point is that New Zealand still owes far more to non-residents than non-residents own of it. And, so, as interest rates rise ... the nation will be paying more and more interest as the debt rolls over for refinancing. Cheap debt doesn't mean cheap forever."
