Better trade figures

Press, 28 July 1987, Page 20

Better trade figures

A remarkable improvement in the balance of trade figures, sustained now for the last three quarterly periods, has resulted in a trade surplus for the year to the end of June. The surplus, $318.6 million, may not seem large, but it is the first to be recorded for four years and is a substantial improvement on the state of affairs just 18 months ago, when New Zealand had a trade deficit of more than $1 billion. These figures are for trade in goods and are not the same as those which make up the balance of payments; the latter account also includes incoming and outgoing investment, debt servicing and insurance. New Zealand traditionally has a balance of payments deficit for these items of nonmerchandise trade, but the surplus in merchandise trade will make New Zealand’s general economic position look better to people overseas. It suggests that New Zealand is coming closer to living within its income. Although the value of imports for the year, at $11,796.9 million, was marginally higher than for the previous year, the value of exports increased markedly, from $10,571.1 million to $12,115.5 million. The result was a turnaround of $1213.8 million in merchandise trade in New Zealand’s favour.

The biggest single factor contributing to this was the large drop in the amount paid to import petroleum products. The value of petroleum oils, other than crude oil, imported in the 12 months was only $349.7 million, compared with $1069.9 million a year previously; the cost of imported crude oil was $360.8 million, an increase of $134.6 million on the previous year. The net result was a reduction of $585.6 million in the cost to the country of importing petrol products. Part of this is a consequence of the lower world price for oil during the year; the apparent savings can disappear almost overnight as oil prices climb again. The other important element in this calculation has been New

Zealand’s increasing self-sufficiency and refining capability as a result of the muchcriticised think-big energy projects. New Zealand earned $1544 million more for the goods it exported during the year. More than half of this — $B3l million — came from increased returns from meat and wool. The traditional agricultural products, meat, wool, dairy products, hides, and skins, still contribute just under half of New Zealand’s export income. When the contribution from exports of other primary produce, fish, fruit, and so on, is added, the country’s dependence on primary trade is emphasised. The rosier complexion on New Zealand’s trade figures results in no small measure from significant price rises for a wide range of our primary products. The boost in returns from agriculture owes more to better prices than to an increased volume of sales. The corollary of these two big influences on the trade figures is the sensitivity of New Zealand’s trade balance to changes in the world prices for oil and agricultural products. Unfortunately for New Zealand, oil prices seem to be on the move upward and prices for much agricultural produce are threatened by agricultural surpluses in the United States and Europe.

Also awkward for New Zealand is the continuing sluggishness of exports in manufactured goods. The main market for manufacturers is Australia. The continuing high value of the New Zealand dollar and a slow-down in the Australian economy contribute to problems for manufacturers.

The better trade figures can be welcomed; the consistent trend is encouraging; nonetheless, the balance is precarious and trade surpluses on their own are not a complete answer to New Zealand’s economic and employment problems.