Growing current account deficit shows why we need to diversify our economy

The growing Current Account Deficit is driven, in part, by falling dairy prices and shows why New Zealand needs to diversify its economy, the Green Party said today.

“The overwhelming economic focus on dairy exports makes New Zealand extremely vulnerable to global dairy prices,” Green Party Co-leader Russel Norman said.

“The National Government is failing to rebalance the economy or present New Zealand with a credible long-term economic strategy.

“New Zealand needs a smart, green economy which adds value and has a diverse base. That would lead to a stronger and more secure future.”

The current account deficit for the December 2014 quarter is the worst seasonally adjusted quarterly result since December 2008, and the net international liability position has risen $1.9 billion since the September 2014 quarter to $153.9 billion.

“Increased tourism revenue is the one piece of good news in today’s announcement, but the Government is putting that at risk with its repeated attacks on our natural environment,” said Dr Norman.

“The annualised current account deficit worsened to $7.8 billion or 3.3 percent of GDP. That means New Zealand is sending $7.8 billion more overseas in profits, interest on debt, and payments for imports than it receives in export receipts and returns on offshore investments.

“We’re living beyond our means.

“We need to keep more revenue in New Zealand. International companies paying larger dividends to their overseas shareholders contributed to the increasing current account deficit, according to Statistics NZ.

“Our economy has serious structural problems, but they can be fixed through things like increased R&D investment and a capital gains tax (excluding the family home),” Dr Norman said.