Economists at ANZ Bank analyze New Zealand’s current account data and its implication for the Kiwi.

New Zealand remains severely out of balance

The annual current account deficit came in at 8.5% of GDP in Q12023, narrowing from a revised 9.0% in Q4 2022 (was 8.9%).

New Zealand’s net international liability position narrowed $5.5bn from Q4 to a still-whopping $189bn. As a share of GDP it narrowed 2.3ppt to 48.8%.

All up, New Zealand remains severely out of balance, but with tourism recovering, we now appear past the worst of it. That said, it could be a long road to something more sustainable.

All else equal, New Zealand’s severe external imbalance continues to hint towards a need for a weak NZD and higher interest rates.