The annual current account deficit came in at 8.5% of GDP in Q12023, narrowing from a revised 9.0% in Q4 2022 (was 8.9%).

New Zealand’s net international liability position narrowed $5.5bn from Q4 to a still-whopping $189bn. As a share of GDP it narrowed 2.3ppt to 48.8%.

All up, New Zealand remains severely out of balance, but with tourism recovering, we now appear past the worst of it. That said, it could be a long road to something more sustainable.

All else equal, New Zealand’s severe external imbalance continues to hint towards a need for a weak NZD and higher interest rates.