That compares with a $27.3b deficit in the year ended September 30, 2024 – or 6.5% of GDP.

Economists had been expecting to see the improvement, with some forecasting a fall to 6% of GDP.

But while the improvement wasn’t that strong, the trend will help ease concerns about the threat the deficit poses to New Zealand’s credit rating.

“Spending by overseas visitors while in New Zealand led the increase in services exports, while dairy and meat led the increase in goods exports,” international accounts spokeswoman Viki Ward said.

In the December 2024 quarter, the seasonally adjusted services balance was a $41m surplus, compared with a deficit of $424m in the September 2024 quarter.

Services exports increased by $688m, driven by a $401m increase in travel exports.

“In the December 2024 quarter, seasonally adjusted exports of travel services were higher than the December 2019 peak for the first time,” Ward said.

“Overseas visitor spending has increased beyond the level seen before the Covid-19 pandemic. Visitor numbers also increased in the December 2024 quarter, although the number of visitors remain lower than before the pandemic.”

The seasonally adjusted goods deficit narrowed to $1.7b in the December 2024 quarter, following a deficit of $1.8b in the September 2024 quarter.

Goods exports increased $669m in the December 2024 quarter to $18.4b. Exports of milk powder, butter, and cheese, followed by meat and edible offal, led the increase. A decrease in fruit exports partially offset the overall increase.

Goods imports increased $582m to $20.1b in the December 2024 quarter.

New Zealand’s net international investment liability position was $210.7b, compared with $209.8b as at September 30, 2024.

What is the current account?

The current account is a measure of the money flowing into and out of the country. It can get confusing because there’s a bit of jargon around the current account’s components … and its place as a component of New Zealand’s total balance of payments.

The easiest bit to understand is the inflow of foreign exchange we earn from exports and the outflow we spend on imports. This is a component of the current account that is also described as the trade balance.

But the current account also includes things like business profits and investments flowing into and out of the country. So, for example, the fact that the banks in New Zealand are largely foreign-owned means multibillion-dollar profits represent a big drain on our current account.

It’s one of the reasons New Zealand is always on the back foot when it comes to trying to run current account surpluses (ie take in more money than we spend).

The grim reality is we are usually in deficit – at least since we opened the economy in the 1980s. We recorded a big surplus (the largest since 1971) in June 2020 – but that was just a weird symptom of closing the borders and locking everyone down at home. We didn’t really buy any petrol and overall imports dived.

The current account is itself a subset of a broader measure of a nation’s financial position with the rest of the world. That’s called the balance of payments and it’s a full set of data that Stats NZ releases.

The balance of payments includes the current account and the capital account. The capital account reflects the net change in a country’s foreign assets and liabilities (or debt). If we run a current account deficit (which we do), that shortfall has to be offset by borrowing, which is added to the capital account.

So, basically, we are a nation that lives on its overdraft and when it blows out, that can be worrying. Especially to those with a conservative attitude to debt.

Current account deficits are almost always big, horrible multibillion-dollar figures – today’s was no exception.

But to get a sense of how bad they really are, it helps to look at them as a percentage of GDP.

To stay with the personal finance analogy, that’s like weighing the size of your overdraft against your annual salary – ie your ability to service that overdraft.

International lenders (and the rating agencies that decide how risky we are to lend to) seem to stay reasonably relaxed about the big numbers because they back the fundamentals of New Zealand’s economy. We sell food to the world and beautiful vistas to tourists. We also have a transparent and stable financial system and a (relatively) sane political landscape. So we retain a strong credit rating.

That said, things started to look precarious in early 2023 when the current account deficit reached 8.8% of GDP.

Anything above 10% is considered a bad look for a country our size and might have us cop a credit downgrade – pushing up borrowing costs (which can become a downward spiral).

Two recent international economic reports have forecast that our current account deficit will continue to improve.

A commentary by economists at BMI (which is part of the Fitch Solutions Group but is independent from the Fitch Ratings Agency) suggests the deficit will fall to 5.8% this year.

They were more optimistic at Capital Economics, picking it to average 5% in 2025 but to go as low as 4% in the fourth quarter.

The trend is good but, unfortunately, it’s not underpinned by stronger GDP growth; rather, it’s the falling dollar and reduced purchasing power that is doing the work for us.

Basically, imports are getting more expensive for Kiwi consumers, so we’re likely to import less over the coming year.

Meanwhile, we have had a strong run with agricultural export commodities that are being aided by the lower Kiwi dollar, making our goods more competitive in a world that prices things in US dollars.

As is so often the case with economics, the good news comes with a warning of downside risk.

“New Zealand’s current account deficit will remain large as domestic demand rebounds and the Government is running a sizeable structural budget deficit,” said Marcus Thielient of Capital Economics.