Trade deficit record $2.3b

By BRIAN FALLOW

WELLINGTON - Despite improving exports, New Zealand recorded a trade deficit of $2.3 billion in the year ended October, in nominal terms its largest ever.

Economic forecasters Berl warned that if the exchange rate appreciated by 10 per cent over the coming 18 months, as the Reserve Bank is forecasting, that would "ankle-tap" exporting and import-competing industries just as they were getting into their stride.

In the three months to October 31 exports were $5.9 billion, 7.6 per cent up on the same period last year. But, continuing the trend since mid-1997, imports rose even faster.

At $7.3 billion they were 15.7 per cent up on the year-earlier level, resulting in a deficit of $1.4 billion for the quarter.

Bank of New Zealand economists said they had expected to see an improving trend in the trade balance by the end of the year, but that scenario was starting to look overly optimistic.

"Although the export trend is improving on the back of stronger commodity volumes, imports are growing at an even stronger pace, boosted by rising oil prices and insatiable demand for new vehicles."

There are signs that the demand for vehicles may abate, however.