This research note questions how New Zealand has managed to sustain its large and growing current account deficits with the rest of the world without seeing a corresponding deterioration in its net international investment position (NIIP). 

It highlights that while New Zealand has been spending more overseas than it earns, the country’s liabilities to the rest of the world have not increased nearly as much as one would expect.

Senior Fellow Bryce Wilkinson’s analysis reveals that since March 2009, New Zealand has spent $158 billion more overseas than it has earned, but its NIIP has only fallen by $32 billion.

Statistics New Zealand shows that receipts from overseas reinsurers have made a significant contribution to funding that $158 billion.

“We do not want more natural disasters, so we can hope this source of funding is temporary”, says Dr Wilkinson.

But the big mystery is who has been funding the $52 billion that Statistics New Zealand has had to attribute to “errors and omissions”. This discrepancy is even more pronounced in the past two years, with $36 billion of the $62 billion current account deficit seemingly funded by mysterious sources.

Ideally, errors and omissions should be small and average out at zero over such a long period. Australia’s corresponding statistics for “errors and omissions” are much closer to this ideal. 

“We need Statistics New Zealand to get on top of the possible answers to this $52 billion question,” Wilkinson concluded. “Who is funding what, and how sustainable is it likely to be”?