THE PRESS FRIDAY, AUGUST 5, 1988. Trade improvememt
The further improvement in New Zealand’s current account for the month of June and for the June year is very welcome. The current account is compiled by taking exports and imports of merchandise trade, and credits and debits of invisible trade, such as services, debt servicing and shipping, into the calculation. The monthly figure for June confirms that an improving trend is continuing. The Acting Government Statistician, Mr L. Cook, estimates that the balance of payments is improving at a rate of about $9 million a month.
For the year, merchandise trade was up by nearly $6OO million and imports of merchandise were down by about $2OO million compared with the previous year to the end of June. This news is not all good because although the credits for invisibles have increased by more than $2OO million the debits have increased by nearly $6OO million, leaving the balance on invisibles worse off over-all by about $378 million compared with the year that ended in June of 1987. The general conclusion must be that on the invisibles side the situation is deteriorating. The merchandise trade will have to improve to overcome that problem. In June the bulk of the invisibles payments was debt servicing. The figures supplied did not include any debt repayments. The Government has been making the point for a long time that debt servicing is a crippling factor in the New Zealand economy. The latest figures bear out the Government’s view.
Despite the improvements, the current account is still in deficit to the tune of $1824 million for the year. However alarming that may seem, it is a better figure than last year’s by nearly $4OO million. The balance of payments figure is an important one in indicating a country’s performance. New Zealand has rarely had its current account in balance. However, the trend is important. The increase in the value of exports is important not only for the country but also for judging the Government’s economic strategy. On the one hand, manufacturers who export have been arguing for a long time that the value of the New Zealand dollar is too high to sustain their exporting effort. On the other hand, it may be argued that exports of manufactures have increased by about 10 per cent, so perhaps their position has been exaggerated. A more detailed examination of the items solves some of the puzzles. There were significant increases in commodity exports of sawlogs and veneer (up 103 per cent); casein and caseinates (64.7 per cent); unwrought
aluminium (up 34.7 per cent, from $377.7 million to $508.7 million); woodpulp (up 21.7 per cent); petroleum (up 79.2 per cent to $135.6 million); and apples (up 26.9 per cent to $157.9 million). But clothing exports were down 24 per cent in value, furniture was down by 16 per cent, iron and steel exports were down, and textiles were down by 10 per cent. The picture that emerges is that a number of exported commodities have risen in value, consistent with the world commodity boom, but a number of export businesses, particularly those with a high labour content, are faring badly. The argument many manufacturers may advance is that if the terms of trade and the commodity boom fail to last, what will New Zealand be left with as alternatives? Primary products, which include pastoral, horticultural, fishing, forestry, and mining products, made up just under 70 per cent of New Zealand’s exports. The value of exported lamb and mutton decreased by 18.6 per cent and 12.3 per cent during the year. In the 1987 trade year New Zealand sold lamb worth $952.9 million and in the 1988 trade year the value of lamb exported was $775.4 million. Stock numbers, including breeding stock numbers, have been falling and it does not seem likely that pastoral farming will be able to boost exports for some time. The value of fish exports dropped by 15.8 per cent to $592.9 million. Squid, hoki, crayfish, and orange roughy all contributed to the decline. The decrease in the value of imports helped to contribute to the improved balance of payments. This is probably a reflection of an economy in recession. There was a 23.2 per cent decline in the value of car imports from Japan, although car imports decreased by only 5.7 per cent over all. Purchases of crude petroleum increased by 35.5 per cent but there was a decrease of 46.5 per cent for petroleum other than crude — an outcome of the expanded refining capacity in New Zealand. The more favourable balance of payments figures cannot be other than heartening, both in the increases and in the trend. But New Zealand is heavily dependent on agricultural production and the value of some major farm exports is down and the decline in stock numbers will prevent speedy recovery. Manufactured goods make up only about 30 per cent of the country’s exports and some important sectors are under strain and would seem unlikely to be able to increase their share of the total exports or provide much increased employment. The traditional fragility of the New Zealand economy is still there.
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Press, 5 August 1988, Page 12
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861THE PRESS FRIDAY, AUGUST 5, 1988. Trade improvememt Press, 5 August 1988, Page 12
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