Current accounts deficit drop forecast

Press, 12 August 1985, Page 16

Current accounts deficit drop forecast

PA Wellington The Minister of Finance, Mr Douglas, predicted has that the current account deficit would fall about half a billion dollars to $2.1 billion in the March, 1986, year. Answering a question in Parliament, Mr Douglas said, “Over the year to March, 1986, an over-all improvement in the current account deficit of approximately half a billion dollars is expected. This takes into account an estimate of interest payments on official debt over the same year of approximately $l4OO million.” Interest repayments cost $1125 million in the 1985 year. “It will bring the deficit down to approximately $2.1 billion,” Mr Douglas said. The deficit at the end of the March, 1985 year was $2695 million. He said the 1985 figure was lower than predicted before devaluation. “In March, 1984, it was predicted that for the year ended March, 1985, the deficit would be $2706 million.

That prediction was made by the Treasury before de- -> valuation. “The out-turn was $2695 . million,” the Minister said. Asked about the effects of « devaluation on the deficit, Mr Douglas said it was difficult to give a precise estimate. *: “Capital goods imports '. JS rose from approximately $2.9 billion in the year ended March, 1984, to $3.9 ; • billion in the year ended March, 1985. Over the same period interest payments on v official overseas debt increased from $744 million to $1125 million. “In the very short term x.'. its effects will have been to '•’* worsen the initial deficit by i scaling up both imports and • exports in New Zealand r dollar terms. “Over time, as exporters and import substitution industries expand, output in response to increased competitiveness, and as import ’ volumes come down in response to higher import prices, an improvement in 7 the current account can be j” expected,” Mr Douglas said.