Annual trade deficit largest since 2007

Higher imported fuel costs and the low New Zealand dollar took their toll in a larger-than-expected trade deficit; pictured, fuel tanker MV Kokako pictured at Roseneath leaving Otago Harbour. Photo: Peter McIntosh
Higher imported fuel costs and the low New Zealand dollar took their toll in a larger-than-expected trade deficit; pictured, fuel tanker MV Kokako pictured at Roseneath leaving Otago Harbour. Photo: Peter McIntosh
Imports far outweighed exports for October, taking the annual trade deficit to $5.8 billion, its largest deficit since October 2007.

With exports dipping 6.4% month on month, imports cost more from a combination of a then low New Zealand dollar and increased imported fuel costs.

October this year marked the 10-year anniversary of the New Zealand-China free-trade agreement. Chinese imported goods were up by a record $430 million, reaching $1.5 billion in October.

Statistics New Zealand international statistics manager Tehseen Islam said on an annual basis, imports from China were now twice the value they were in the October 2008 year, while exports during the decade had more than quadrupled.

''Two-way goods trade with China is continuing to strengthen,'' Mr Islam said.

New Zealand's increasing reliance on Chinese trade comes at a tense time, as China-US relations are strained over ballooning tit-for-tat trade tariffs, plus the respective expectations of the economic giants on their smaller trading partners.

The October trade deficit was much larger than expected by analysts and the market.

The total goods exported for the year ended October was $57.2 billion, while total goods imported for the same period was $63 billion - a $5.8 billion deficit.

The monthly trade deficit for October was $1.3 billion, with total goods exported at $4.9 billion and total goods imported at $6.2 billion.

ASB senior rural economist Nathan Penny said the $1.3 billion October deficit was larger than expected, the market having picked $850 million and ASB $700 million.

''Strong import demand contrasts with weak business sentiment.

''From here we expect a modest reduction in the trade deficit as agricultural production and export volumes lift,'' Mr Penny said.

Westpac senior economist Astasia Ranchhod noted the $1.3 billion deficit was higher than expected, crediting the result to the weak kiwi and rising fuel costs.

He said for the year to October, the cost of New Zealand's imports had risen above $6 billion for the first time.

''While that was in part due to rises in the cost of fuel imports, it also reflects some positive trends in domestic activity,'' Mr Ranchhod said.

Firmness in demand had encouraged increased investment spending by businesses. Machinery imports were up 7.5%, transport equipment up 10% and there was ''solid growth'' in imports of consumer goods, up 11%.

Mr Islam said China was New Zealand's largest trading partner and was a key supplier of goods such as cellphones and computers,

In the past decade, annual cellphone imports from China were up by $644 million to $781 million, while computer imports rose by $479 million to $955 million.

Conversely, China was a big export market for dairy products, wood, and meat. Exports to China were up by $242 million to $1.2 billion when compared with October last year, he said.

Over the same decade, annual goods exports to China increased $11.2 billion to reach $13.5 billion for the year ended October.

Milk powder, butter and cheese led this rise up $3.7 billion, with milk powder alone up $2.1 billion, while logs, wood, and wood articles were up $2.6 billion and meat and edible offal was up $1.8 billion, these being key contributors to the exports rise.

simon.hartley@odt.co.nz

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