# What is up with the balance of payments?

Ok, so this may seem arbitrary – but I think it gives a good indication of how dodgy statistics can be 😉

So on Thursday the Balance of Payments was released. The BOP must equal zero – that is an identity it has to hold. When people talk about the BOP deficit they are being weird, they often mean a “current account deficit”.

Now we did have a current account deficit over the December quarter, of $4bn. So the outflow of goods, services, and interest payments exceeded the inflow by $4bn – quite a bit for a little country like NZ.

To pay for this we need to fund the “deficit”. So we need to run a capital/financial account surplus. In essense, we need to borrow money, or sell assets, to pay for the current account shortfall. However, according to the statistics we also ran a capital/financial acccount deficit of over $2.6bn.

As the BOP=Current Account + Capital/Financial account, we did have a BOP deficit 😛 However, this then get adjusted for “errors and omissions”. In this case, a $6.7bn (thanks to rounding) error/omission. Well – that makes it pretty difficult to tell what the stats even mean 😀

Now, this is probably mostly on the financing side.

However, there is a second issue. NZ is constantly running with positive errors in the BOP – which implies that we are either underestimating our capital account surplus or overestimating our current account deficit (or both, or not one but even moreso the other 😛 ).

This implies that this extremely important data point – which tells us how our debt with the rest of the world is changing, and our asset position – is systematically biased, and riddled with errors.

Now I am sure that Stats does the best job possible – this is just one of those unfortunate things that happens with incomplete data sets. There is some stuff they just can’t get hold of – and as a result there are areas where we are all completely in the dark …

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