New Zealand’s trade balance
- Trinity Auditorium
- Jul 29, 2024
- 2 min read
With the mock exams this term and external exams coming up at the end of the year it is useful to be able to have some knowledge of New Zealand’s trade position especially as it is so important to the economy. Trade is just one of four accounts in the Current Account of a country.
Balance of trade in Goods – also know as visibles. E.G. Manufactured goods, Semi-finished goods, energy products, raw material, consumer goods and capital goods. The difference between visible exports (+) and imports (-) is sometimes known as the ‘Balance of Trade’. See image below for exports and destination.
Balance of trade in Services – Invisibles. E.G. Tourism, Banking, Shipping and Transport, Education, etc. The difference between invisible exports (+) and imports (-) is Balance on Services.
Balance on Primary Income – measures two main flows of income into and out of NZ: the compensation of employess – wages and salaries and investment income – Interest Profits and Dividends coming into NZ from NZ assets owned overseas matched against the outflow of profits and other income from foreign owned assets located within NZ.
Balance on Secondary Income – this includes payments made and receipts received for which there is no corresponding exchange of actual good or service. They include government transfers such as payments to and receipts from international organisations and foreign aid. Transfers by private individuals are also included in this part of the current account – workers’ remittances (transfer of money from people working in a foreign country.
New Zealand Exports – by composition and destination. Total: $46.5bn – 2022
New Zealand’s annual current account deficit was $27.6 billion for the year ended March 2024, equivalent to 6.8 percent of GDP. The annual deficit eased by $4.1 billion during the year due to a reduction in imported goods, lower sea transport costs, along with higher international tourism revenues. These were partially offset by an increase in foreigner investment earnings on their New Zealand investments.However, global dairy prices fell 6.9 percent in the global dairy trade auction undertaken on 2 July. As a result, prices are at their lowest level since March. Wholesale milk prices, which influences the dairy farmer payout in New Zealand, fell by 4.3 percent. These reduction in prices has been influenced by an increase in supply from the northern hemisphere.
OutlookHigher global interest rates are dampening demand for New Zealand’s exports, while higher interest rates locally are reducing demand for imports (partially durable items such as vehicles). NZIER Consensus Forecasts has the current account deficit easing over their forecast period out to March 2027, with export growth outweighing import growth.
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