A substantial fall in imports helped narrow the quarterly deficit by $1 billion to $2.7 billion, Statistics New Zealand figures showed.
The seasonally adjusted goods balance rose to $863 million, the first time a goods surplus has been recorded since March 2003.
Offsetting this was a still large investment income deficit.
The annual deficit was $15.25 billion, amounting to 8.5% of gross domestic product.
The current account, also known as the balance of payments, measures all of New Zealand's transactions with the outside world.
ANZ-National Bank chief economist Cameron Bagrie said that while foreign firms operating in New Zealand recorded lower profits, a marked drop in the returns of New Zealand investors offshore saw the investment income deficit remain broadly unchanged from the previous quarter.
The investment income deficit remained large at 7.1% of GDP and had not shown as much of an improvement as expected given the challenging domestic profit environment, he said.
The investment income debit side had fallen and was down 15% from its September 2007 peak.
However, New Zealand-owned firms or interests operating offshore had seen an even larger decline in earnings with the investment income credit side down 58% from the 2007 peak.
"Looking at the returns being generated, foreign investors continue to enjoy a far higher rate of return on their New Zealand assets compared to the returns from New Zealand investment offshore - annualised rate of 5.1% compared to just 1.5%.
"Should such a divergence in performance continue to persist, the investment income deficit will continue to remain large."
The fact that the current account had started to improve was an encouraging sign, but it was disappointing it had not improved as much as expected, Mr Bagrie said.
Weakness in domestic demand would see ongoing weakness in imports, but New Zealand could not rely on that to improve the external position.
There was a limit to how far imports could fall, he said.
A sustained turnaround in the external position would need to come from an improvement in export performance either through volumes, or prices - preferably both.
"The weak global backdrop, dairy subsidies affecting global prices, and the recent appreciation in the New Zealand dollar are doing the tradeable sector no favours.
"Should the currency remain elevated for some time, the recent improvement in the goods and services balance will prove to be temporary, resulting in a very drawn-out current account adjustment process."
