Rising imports weaken NZ's trade balance

By Brian Fallow

WELLINGTON - The March export figures have confirmed New Zealand's deteriorating trade balance.

Figures released yesterday show exports in the March quarter were 1.1 per cent up on the same quarter in 1998, but imports were up 7.5 per cent, despite a 5 per cent fall in the dollar making them more expensive.

The trend in the merchandise trade balance has gradually worsened in recent months as imports, fuelled by the economic recovery, outpace export growth, says Statistics New Zealand.

However, Bank of New Zealand economist Peter Jolly sees early signs in the latest figures that the worst may be over for exports.

"Recovery in Asia is having a positive impact on log and fish exports, with wood up 15 per cent and fish 18 per cent higher [in the March quarter] than the same period last year."

But Deutsche Bank chief economist Ulf Schoefisch said that based on surveyed expectations, he expected only a modest pick-up in exports over the June quarter.

"Looking further ahead, despite some recovery in New Zealand's export prospect on the back of upward revisions to world growth prospects and a pick-up in commodity prices, we expect a worsening in the trade balance in the near-term."

A stronger dollar is making imports cheaper. This, coupled with tariff cuts and parallel imports, is increasing import penetration.

The trade deficit for the March year was $1.19 billion.