Trade outlook 'promising’

Press, 13 July 1989, Page 2

Trade outlook 'promising’

NZPA Sydney The external sector is New Zealand’s saving grace and it should continue to support the economy in the immediate future, according to the Westpac Banking Corporation. The main Australian bank’s July issue of “Market Insights” says the outlook for New Zealand’s balance of trade is still relatively promising. “The future of world growth is still positive and New Zealand should continue to make competitive gains in its key export areas,” the publication says. “Agricultural input price inflation remains low and productivity gains continue to be made. “Volume growth in exports of

about 3 per cent can be expected over the next two years. Import volume growth is also expected to grow by 3 per cent as the domestic economy begins a slow recovery.” New Zealand’s surplus on merchandise trade more than doubled to $3.13 billion in the year ended April, benefiting from strong commodity prices, moderate growth in export volumes and reduced demand for imports. Westpac said New Zealand’s invisibles trade deficit was a continuing worry and the current account deficit was expected to widen from $1.55 billion in the short term as the New Zealand dollar settled at lower levels and world interest rates rose.

In the medium term, large inroads into the deficit should be made as New Zealand used its asset sales to repay overseas debt. “Provided that internal deficit targets set by the Government are met, the asset-sales programme continues and the merchandise trade balance does not weaken, the outlook is for a continuing improvement in the debt position,” Westpac said. The bank also warned that inflationary pressure in New Zealand was mounting, with producer price?, peaking this quarter and GST rising, to 12.5 per cent.