New Zealand’s annual trade deficit climbed to $3.4 billion in September but BNZ head of research Stephen Toplis said the deterioration was inconsequential.
Although the balance of trade was in negative territory, it was a far cry from the $7.3 billion deficit recorded in February 2006.
"If you exclude lumpy items, like aircraft, the annual deficit sits at just $2.2 billion."
The big question was whether the current situation could be sustained or if the economy was about to suffer the consequences of the ongoing strength in domestic demand.
There was reason for concern as imports were growing faster than exports, Mr Toplis said.
If the data was also adjusted for movement in exchange rates, exports were 3.6% higher in the September quarter than they were a year earlier.
By comparison, imports rose 6.7% in the same period.
The BNZ forecasts assumed the growth disparity between imports and exports would narrow, particularly as dairy price increases started to offset recent oil price movements.
But there was a vulnerability which needed close monitoring, he said.
Statistics New Zealand said the country’s trade deficit grew to $1.44 billion in the month of September, from $1.14 billion a year earlier.
Exports fell 5.7% to $3.47 billion, led by a 35% fall in meat and edible offal exports to $281 million, the lowest monthly reading since August 2013.
That pushed meat exports down to third place in the monthly rankings, behind wood, although meat remained in second place on an annual basis.
Excluding aircraft imports from the total, imports fell 0.8% to $4.7 billion, Statistics NZ said.
The meat export market was retreating from highs reached last year, when beef exports reached a record high as a shortage in the United States pushed up prices.
In the latest monthly data for September, the value of beef exports fell 35% from a year earlier amid increased beef supply in the US and lamb exports sank 39% because of subdued demand in the UK.
Mr Toplis said with New Zealand businesses reporting increasing capacity constraints to their operations, it was assumed business investment would increase and help drive up imports.
"It is somewhat disheartening imports of capital goods are not already stronger than they are."
Reasons for the delay included businesses still not being confident enough to invest, despite the constraints they were meeting, he said.
New Zealand’s potential output was being restricted as a consequence and there was a greater chance output would be rationed through higher prices.
While businesses had been reluctant to invest, consumers were showing no reluctance to spend, Mr Toplis said.
