29 Apr 2015

Economist says trade deficit will widen

4:49 pm on 29 April 2015

New Zealand's trade deficit will continue growing from its current six year high, according to an economist.

Statistics New Zealand figures show that for the year to the end of March, the annual trade deficit was $2.4 billion.

Rural economist at ASB Nathan Penny said imports will continue to outweigh exports but in this case it actually showed a strong economy.

"Our firms are investing so they're importing machinery, also households are pretty chirpy so they're importing you know TVs and other consumption goods so for the rest of this year we do expect it to widen over the year."

A slump in dairy prices is largely being blamed for the largest annual trade deficit in nearly six years.

Exports to both China and Australia have both fallen in the past five months, compared with the same time last year.

However the drop in exports to China has been larger, which has put Australia back as New Zealand's top export destination for the first time since the year to the end of November 2013.

Total exports fell by $103 million to $4.9 billion, a 2 percent drop on the same month last year.

The slump in whole milk powder prices dragged down exports to China by 29 percent or $324 million, while exports to Australia fell $26 million.

Goods like clothing helped push up imports by $169 million or 4 percent to $4.3 billion in March 2015.

Senior BNZ economist Doug Steel said the latest trade figures for March looked quite strong, despite some mixed results.

"Pretty much all over the show," he said. "They've been buffeted by a whole lot of factors, the likes of the dairy price slump."

Nathan Penny said dairy prices were expected to rebound, and when that happened the deficit will start to narrow.

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