29 May 2010

NZ posts first trade surplus for eight years

6:25 pm on 29 May 2010

Price rises for dairy, meat and timber have helped New Zealand to post its first annual trade surplus in almost eight years.

Figures issued by Statistics New Zealand show the annual trade balance, for the year to the end of April, was a surplus of $161 million.

It is the first annual surplus since July 2002 and compares to a deficit of $172 million in the year to March.

New Zealand exported $4 billion worth of goods in April - up 9% on the same month last year, driven by more sales of milk powder, butter and cheese, and higher prices for logs, aluminium and crude oil.

Imports fell 0.2% to $3.3 billion, led by petroleum products and machinery.

ASB economist Jane Turner says export prices may ease as the agricultural export season winds up, but strong commodity prices will continue to support the economic recovery.

Ms Turner says that while volatility in the European markets could threaten future price rises for exports, New Zealand's market isn't too exposed.

Dollar picks up again after IMF report

The strong trade figures have helped undo much of the damage done to the New Zealand dollar by an International Monetary Fund (IMF) report.

On Thursday, the dollar dropped more than a cent after the IMF highlighted New Zealand's still-high levels of overseas debt, but it recovered to more than US67c as traders focused on the stronger-than-expected trade balance.

The IMF notes New Zealand's overseas debt fell during the recession as households borrowed and consumed less. But its forecasts for the next two years show the country's debt rising again as economic growth picks up to more than 3%.

It says a significantly lower dollar for an extended period of time is needed to boost exports and help pay off debt.

A report by the Organisation for Economic Co-operation and Development (OECD) portrays a similar picture: the current account deficit - a measure of the rate at which a country is adding to its debt - rising to 6% of gross domestic product next year from 2.9% now.