Stats NZ figures narrow, but Westpac flags a catch
New Zealand's current account deficit narrowed to $3.8 billion in the June quarter, $666 million tighter than the March quarter, according to Stats NZ.
But the release also carried sizeable historical revisions that meaningfully reshape the picture of New Zealand's external position over the past two years, according to Westpac senior economist Darren Gibbs.
Revisions lower the deficit, then it widens again
Gibbs wrote that the "more recent revisions have materially lowered the deficit," with the annual deficit to March 2026 now estimated at 3% of GDP rather than the previously reported 3.6%. The bulk of that revision, around three-quarters, came from primary income flows, with new estimates showing higher returns on New Zealand's overseas investments and lower returns paid to foreign investors here.
Some of the shift had already been signalled by an earlier release showing a smaller goods and services deficit, driven mainly by a downward revision to goods imports — meaning the changes carry no implications for Westpac's estimate of June quarter GDP growth, which it still expects to come in at 0.2%.
Moving off that revised base, Gibbs noted the annual deficit widened to 3.2% of GDP in the year to June, in line with Westpac's expectations, with further widening likely in coming quarters as higher costs for imported energy work their way through the figures.
Even so, Gibbs pointed out the deficit remains only about a third as wide as its 2022 peak, and not much wider than it was heading into the pandemic — a level he suggested credit ratings agencies should remain comfortable with.
At the quarterly level, Stats NZ attributed the narrowing largely to the primary income balance, which improved by $712 million.
International accounts spokesperson Shanna Dilworth explained the primary income balance reflects the gap between what New Zealand earns on its overseas investments and what it pays out to foreign investors here. That deficit fell to $2.3 billion in June, from $3.1 billion in March. The goods balance told a different story, widening by $416 million, while services swung to a $300 million surplus.
A two-decade low, but debt still weighs heavy
New Zealand's international investment position improved sharply in the June quarter, with the net liability falling to $178.3 billion, or 39% of GDP — the smallest share of GDP recorded this millennium.
Gibbs attributed the improvement largely to favourable changes in offshore asset valuations, particularly portfolio equity holdings, reflecting strong performance across global share markets. In nominal terms, it's the smallest liability since 2022. Net external debt, however, remains substantial at 49.4% of GDP.
For mortgage advisers, the picture is a mixed one: while the improved investment position points to underlying strength, Westpac expects the external deficit to widen again as energy costs bite, a dynamic that could feed into inflation and interest rate settings shaping borrowing costs in the months ahead.
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