Figures show exporters suffering as Australia dragged into recession

CANBERRA - New figures from both sides of the Tasman confirm that New Zealand exporters will continue to face hard times in their biggest market as the global economic crisis drags Australia into recession.

New Zealand's transtasman trade suffered a 20.7 per cent hit in April - led by a halving in the value of crude oil - and the release of Australia's latest national accounts data tomorrow is expected to report a further contraction in gross domestic product for the March quarter.

This follows a 0.5 per cent shrinkage in the three months to December, and would officially place the nation in a recession that most commentators believe is already well under way.

Much of the impact is in areas important to New Zealand exporters feeding into construction and related sectors, retail - especially whitegoods - and discretionary spending now being hauled back dramatically by households both watching their budgets and fearing for their incomes.

Apart from crude oils, New Zealand's major sales to Australia include wine and cheese, timber and chemical wood pulp, refrigerators and other whitegoods, insulated wires and cables, gold, plastic articles and yachts and other vessels.

New Zealand also exports services worth more than A$2 billion a year.

Transtasman trade has generally been a growth industry, with figures from the Australian Bureau of Statistics showing that in the nine months to the end of March imports from New Zealand had risen by more than 6 per cent, to A$5.5 billion. But the impact of the global crisis is now being felt.

Last week Statistics New Zealand reported that sales to Australia in April fell by $179 million, part of a wider trend that saw the month recording a fall in total exports for the first time since August 2007.

The trend for total merchandise exports had been rising at an average of 1.2 per cent a month since February 2007, but flattened to a monthly average of less than 0.1 per cent from last October.

New statistics and projections indicate that Australian markets will continue to suffer, with new capital expenditure contracting and businesses scaling back their investment plans for the next 12 months.

Seasonally adjusted, total new capital expenditure for the March quarter reversed year-on-year growth of 6.8 per cent and fell 8.9 per cent compared with the three months to the end of December. Building and construction slipped by 4.7 per cent, and equipment, plant and machinery by a much larger 10.8 per cent.

The key now will be the ability of vast Government spending and incentive schemes to cushion the economy until recovery begins.

Federal and state infrastructure spending, combined with extended first-home owners' grants, couldhave implications for New Zealand, both through supply of components and services, and potential to bidfor contracts. Under the 1997 transtasman Government procurement agreement, New Zealand and Australian products and suppliers must be treated equally.

Treasurer Wayne Swan announced a A$22 billion infrastructure programme in his recent Budget, including major highway and roads projects, metro rail plans for Melbourne, Sydney, Brisbane, Perth and the Gold Coast, and major port projects.

State governments have also outlined new spending plans.