Trade deficit melts as imports shrink

The trade deficit almost vanished in the first three months of the year as imports shrank faster that exports.

The seasonally adjusted deficit was just $65 million, the smallest for seven years. Over the past seven years New Zealand has on average imported $1.14 worth of goods for every $1 of exports. In the March quarter it was just $1.006.

Exports at $10.8 billion were down 4 per cent on the December quarter, when adjusted for seasonal effects. Dairy receipts were down nearly 10 per cent, despite a 17 per cent increase in volumes shipped.

Oil exports, from the Tui field, were down 46 per cent and aluminium down 43 per cent, reflecting both lower prices and the fact that one of the Tiwai Pt smelter's three potlines is out of commission.

The export numbers were flattered by a lumpy item, $144 million worth of aircraft, last month.

But while exports fell, imports fell more, 12.8 per cent or $11.6 billion, the largest quarterly fall since March 1988.

The big mover was crude oil imports, down by more than $600 million or 52 per cent on December and by 46 per cent on the March quarter last year. Statistics New Zealand said both prices and volumes were lower but noted that crude is imported in large irregular shipments, which can throw even quarterly figures around.

Car imports at $370 million were down $195 million on the previous quarter and the lowest since 1997.

ASB economist Jane Turner expects imports to continue weakening with the decline in domestic demand.

Exports remained supported by strong volumes of commodity exports but that masked an underlying weakening of demand for New Zealand's exports, she said.

"The global nature of the recession will limit New Zealand's ability to stage an export-led recovery. The [kiwi dollar's] recent strength ... presents a further challenge."