Current account deficit reduced by half

Press, 3 February 1984, Page 2

Current account deficit reduced by half

Parliamentary reporter

New Zealand ended 1983 with a higher trade surplus, and lower overseas borrowing to produce a current account deficit less than half the size recorded a year earlier. According to the Overseas Exchange Transaction figures released yesterday by the Reserve Bank, official overseas reserves also rose significantly during the year. However, the Labour Party has criticised the performance because of continued Government borrowing and high monthly external deficits shown in the Reserve Bank’s figures.

It was the accumulation of these deficits which a member of Parliament, Mr Peter Neilson (Lab., Miramar), criticised in a statement.

Mr Neilson, chairman of

the Labour caucus economic committee, said that by the end of 1984, the annual external deficit could be as big as $2 billion, as a result of letting the money supply go, boosting demand by running “enormous” Government deficits, and not making exports and import-sub-stituting sufficiently profitable.

All categories of export receipts were up in December except meat, which was down 30 per cent due to continued slack market conditions for lamb and mutton, the Reserve Bank said. An interesting feature, nevertheless, was a significant drop in private borrowing overseas. The bank speculated that this may be due partly to the fall in interest rates, making the domestic market more attractive to borrowers.

Export receipts for 1983 were 11 per cent up on 1982,

while import payments fell 4 per cent, producing a trade surplus of $1277 million for the year ended December, 1983. Seasonal influences were blamed for a poorer performance in the December quarter, when export receipts fell 18 per cent and import payments rose 1 per cent, producing a trade deficit for the quarter of $47 million. This also resulted in a worse current account deficit in the December quarter (S6IOM) compared with the September quarter ($326M), but the annual current account deficit showed an improvement, falling to SB94M, compared with $1845M in the year to December, 1982. The current account deficit for the month of December was S2OSM, compared with S2O3M in September, S2OIM in "October,

and S2O4M in November. Import payments were also slightly up, showing a surplus on trade for December of $6 million, compared with a deficit in December, 1982, of SS7M. The deficit on invisible transactions for the month rose by S4IM when compared with November statistics, but the December deficit on invisibles, S2IIM, was identical to that recorded in December, 1982. A total of S4OOM in capital came into New Zealand in December, most of it — S3OBM — through Government borrowing, while private borrowing brought in only S92M. Total capital inflow for the year at S9I4M was down from the peak of $1352M recorded in the 12 months to July, 1983. Government borrowing for the year amounted to S3ISM, compared with S9B3M in 1982.