Bank borrowing and profit repatriation driving current account defecit – CTU

After 15 months of improvements in the current account deficit, income paid to overseas investors is returning the deficit to its previous form, said Bill Rosenberg, CTU Economist and Policy Director. The current account is the difference between what New Zealand as a nation pays and receives from abroad.

“The country appears to be leaving this recession in the same state it came in, with exports faltering, imports rising again, and banks still borrowing heavily abroad to finance mortgages and other lending. It does not bode well,” said Rosenberg.

Although New Zealand’s net liabilities to the rest of the world improved during the quarter, banks are still borrowing heavily from overseas and borrowing short term. Bank debt drove a $6.5 billion flow of foreign investment into New Zealand. It was “mainly in short term money market instruments” according to Statistics New Zealand.

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