NZ posts smallest annual trade deficit in 6 years as imports shrink

Thursday 27th August 2009

New Zealand posted its smallest annual trade deficit in six years as the prolonged recession sapped demand for imports, outpacing a decline in exports.

The annual deficit shrank to $2.48 billion, the lowest since mid-2003, as imports fell for an 11th straight month, according to Statistics New Zealand. In the month of July, the deficit was $163 million, down from June’s $332 million gap, which reflected Qantas Airways’ Jetstar unit importing $571 million of aircraft into the country. A monthly deficit of $150 million was forecast, according to a Reuters survey.

A shrinking trade gap may help bring down the nation’s current account deficit, which stood at 8.5% of gross domestic product in the first quarter, down from 8.9% in the same period three months earlier. Last month, Fitch Ratings lowered the outlook on New Zealand’s AA+ credit rating to ‘negative,’ saying the current account was above levels necessary to stabilise and reduce the nation’s net foreign liabilities.

“The current account deficit will continue to narrow in coming years through a combination of moderate import demand and an eventual recovery in export earnings once the global economy is on a surer footing,” said ASB chief economist Nick Tuffley. “However, the pace of closure is likely to slow soon” as New Zealand moves out of its pastoral season and the decline in imports eases, he said.

Exports shrank 7.3% to $3.2 billion in July from the same month last year, led by a $119 million fall in oil exports and a $50 million decline in meat and edible offal. The value of imports decreased 21% to $3.3 billion as diesel and oil imports shrank $544 million and capital goods such as machinery and plant equipment sank $132 million.

Exports to Australia, New Zealand’s largest trading partner, sank 16% to $731 million last month from the corresponding month a year earlier, while exports to the U.S. tumbled 29% to $297 million.

Still, exports to China remained strong, jumping 52% to $302 million, making New Zealand’s free trade partner the third largest annual export destination.

The kiwi dollar was little changed at 68.04 U.S. cents after the announcement from 68.12 cents before the release, and recently traded at 68.07 cents.

Businesswire.co.nz

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