New Zealand’s current account deficit blew out to a record $20.2 billion in 2021 after imports far outstripped exports in the final quarter of the year, figures released by Stats NZ show. Westpac senior economist Nathan Penny said the deficit reflected the “hot New Zealand economy”. “We are, at least temporarily, living beyond our means,” he said. ANZ economist Myles Workman said the annual deficit was not unexpected but was something that credit-ratings agencies were likely to keep on eye on, as they assessed the country’s credit worthiness. New Zealand’s last ratings-move was an upgrade a year ago, when S&P increased the ratings of New Zealand’s foreign and local currency government debt by a notch to ‘AA+’ and ‘AAA’, respectively. Workman expected the deficit might get a bit worse before it improved. But he noted the deficit was still lower than at the beginning of the GFC when expressed as a percentage of GDP rather than in ‘dollar’ terms, at 5.8 per cent of GDP versus 7.8 per cent of GDP in 2008. Infometrics principal economist Brad Olsen said the deficit was more evidence the country was at the tail-end of an economic cycle.
The deficit was not yet a huge cause for concern, especially given moves to open the border for more tourism, but could become more troubling if demand from China was further impacted by slow growth there, he said. New Zealand had a remarkably strong trade performance in the early days of the Covid crisis in 2020 when exports held up well and imports were reduced by lockdowns. But that performance did not continue into last year, when imports boomed and export growth could not keep up. Stats NZ said the quarterly current account deficit climbed to $6.5b in the three months to the end of December, up from $4.7b the previous quarter.