New Zealand’s annual current account deficit was $33 billion, or 8.5% of gross domestic product, in the year ended March — down from $34.4 billion in the 12-months to December.
This means the country is still spending more than it is earning overseas, but less than it was last year when the trade deficit hit a decade-long record at 9%.
Some economists expected the trade balance to worsen in the first quarter of 2023, but it improved slightly as service exports, such as tourism, recovered.
Stats NZ said service exports increased 56% to $22 billion in the year ended March 2023, while service exports increased 40.3% to $29.4 billion.
Paul Pascoe, a senior manager at Stats NZ, said both import and exports of travel and transportation services increased during the year as more people made trips in and out of the country.
The historically wide trade deficit has been largely due to low commodity prices and higher import needs, including of fuel after the closure of Marsden Point refinery.
Also, the covid-19 pandemic greatly depressed two of the country’s service exports — tourism and education — neither of which have yet bounced back fully.
In the year ended March, goods imports increased 18.4% to $86.6 billion, driven by petrol, machinery, and transport equipment.
Goods exports increased just 10.7% to $73.0 billion driven by dairy products, such as milk powder, butter, and cheese.
New Zealand’s net liability position—or international debt—shrunk $5.5 billion, or 2.9%, to a net $189.1 billion.
A significant inflow of insurance money boosted NZ’s capital account which recorded $2.3 billion coming into the country.
“The March 2023 quarter inflow of $2.3 billion is mainly made up of claims by New Zealand insurers on overseas reinsurers, following the larger than usual claims that have arisen from the Auckland flooding and Cyclone Gabrielle,” Pascoe said.
A reinsurer is an insurance company that insures the risks of other insurance companies
Slightly less wonky
Miles Workman, a senior economist at ANZ Bank, said the current account data showed a “slightly less wonky” economy.
“All up, New Zealand remains severely out of balance, but with tourism recovering, we now appear past the worst of it. That said, it could be a long road to something more sustainable”.
The country may need to maintain a weaker NZ dollar and higher interest rates to bring the ledger back into balance.
International tourism and education are both progressing well and the FIFA Woman’s World Cup, which kicks off in July, could help to keep export momentum through the winter lull.
However, exports need to do more than just return to pre-covid levels, they need to overtake imports which have grown well beyond pre-pandemic levels.
Michael Gordon, a senior economist at Westpac, said the smaller deficit was a surprise as his team and financial markets were expecting an unchanged result.
“The other, though much smaller, surprise for us was that profits of overseas firms were down sharply compared to previous quarters,” he said.
“We’re seeing something similar in the corporate tax data, which is now falling substantially short of the Treasury’s forecasts as businesses struggle with rising costs and a cooling economy”.
The blowout in the current account deficit was due to both a loss of export earnings from overseas tourists, and a surge in imported goods prices and shipping costs.
“There are limited avenues for boosting our export earnings from here, so bringing the current account deficit back to levels that are more sustainable over the long term will require a reduction in our spending on imports,” he said.
38 Comments
we're increasing the EVs on our roads which is reducing the need for importing fuel
This statement is purely ideological at this stage. Even if somehow replaced enough passenger ICEs with EVs in this country, diesel and jet fuel make up nearly two-thirds of our imports. The world is at least a decade away from having commercially scalable planes and trucks running on alternative fuel sources.
In reality, pull up articles from last year and you'll notice that Labour was awaiting technical advice on the matter while the refinery shutdown went ahead pouring concrete down the pipes.
So, the government had no option but to put a positive spin on the entire situation, which was completely out of its control, as a win.
We are already seeing EV heavy trucks trickle in (eg https://evsandbeyond.co.nz/scania-evs-hit-the-road-for-reliance/) , and EV Cars do replace diesel cars and Utes. Aviation and shipping are still a while away.
If we had everyone with EV's, we would have nowhere near the power generation available to service this level of demand. I'm counting the years until peak power goes from 5-9pm through to 5-12pm once all the extra EV's start charging at night and the demand is too much for the grid. You build the generation first, not the other way around, and infrastructure planning for the long term is what is needed, not just something that will act like a new highway and reach capacity in 10-15years.
Since there is no way we get to 80% EV fleet (even in passenger cars) within less than 2 decades, its a bullshit argument. There is a lot of consented generation waiting to be built, but the demand isn't there yet to justify building it. It will get built as demand increases.
Did we wait till we had gas stations in every town before we started importing cars? Nope. Did we wait till we had 100% nationwide coverage of cellphones before we started using those, nope.
New power generation assets alone won't cut it. Our power network (transmission and distribution) will need significant upgrades to handle such an increase in peak demand for electricity.
One estimate by the NZ network association is NZD 22 billion in capital investments until 2030. It's either coming out of the pockets of taxpayers or the users (higher fixed charges on our electricity bills).
There's no reason that significant numbers of private passenger EVs need to charge at peak hours, and multiple ways to move EV charging to low demand periods.
Its not EVs that are the problem, its electrification of industrial process heat and to a much smaller degree heavy transport electrification.
I suspect we just need to control this through price signals. We know demand for electricity drops off a cliff at 12am, no reason all the electric cars can't start charging at that point. Make it cheap then and that's what will happen. In most electric cars these days you get something like 8km range per hour out of a standard socket. A lot of people obviously upgrade and triple this. If people are dumb enough to charge their cars during peak hours and get charged peak rates, that's on them (their house breakers might be thrown anyway?).
A decent plug in charger will do 10A, (2.3kW) which is about 12-15km of range per hour.
And yes, most EVs these days have scheduled charging built into the car/ app, so pricing signals should be very effective. Pop the charger plug in as you get home, and at midnight you hear the relay click and the car starts charging. (Unless you were daft enough to spend $300k on a merc EQS. That feature is a bit to fancy for Merc)
Saw an article from the UK featuring Rowan Atkinson and a number of people who have given up on EV's due to poor charging infrastructure. The number of charging stations have gone from 31 to 36 users per station in a few year. Most people gave up and went Hybrid. As soon as you don't have a garage and need to street park some people could not even charge at home, one persons nearest charge station was 18 miles away. People sitting for hours waiting for their cars to charge while reading a book, its a joke. I fully expect EV owners here will be forced by the government to put solar on the roof as our grid collapses.
EVs are not going to collapse our grid. Take a look at the big dip in the national grid demand from 10pm to 6am everyday at https://www.transpower.co.nz/system-operator/live-system-and-market-dat…. Thats 8 hours of low demand that's perfect for EV charging.
As for Rowan Atkinsons brain fart, there are plenty of replies that refuted most of his nonsense, feel free to go read them if you actually have any interest in learning something.
We are not the UK, we don't have lots of high and medium density housing with no parking.
checking the fact checkers
"As for Rowan Atkinsons brain fart"
So I got 30 sec into it and it just appeared to be another tinfoil hatter going on about global conspiracies. Is there any actual science mentioned in there anywhere, cos I CBF watching anymore of that nonsense.
There are many others who tore down Rowans brainfart. Hydrogen and Synthetic fuels aren't a goer at the moment, and hydrogen never will be for passenger cars, synthethic fuels look pretty unlikely, for mostly the same reason. Hydrogen ahs already been tried time and again for passenger cars, Toyota Mirai isn't actually a bad car, pity the fuel is so expensive and inconvenient it never will reach wide adoption.
Both H2 and e-fuels may be option for heavy shipping and trucking, until a better battery system is invented, but they are going to be expensive as all hell. Bye bye cheap international travel, bye bye cheap international shippng if Govt push forward with banning fossil fuels.
It was the usual bunch of ignorant reckons about EV's, so much so the Guardian had to run a fact-check article disputing most of his claims.
https://www.theguardian.com/environment/2023/jun/08/fact-check-why-rowa…
They are a publicly listed company making decisions on behalf of their shareholders. Is your position that you would like to see Labour sticking their noses into private business decisions more than they currently do?
I am not sure myself, but it's fun to see Labour receive the exact opposite of the usual criticism thrown at them.
Labour was given the option of subsidising the operation of Marsden Pt in order to keep it running, much the same way as the Govt subsidises the Tiwai smelter. There is a big difference between a profit oriented company deciding to close a non performing asset, and a Govt that decides to allow a strategic and economic asset to shut down. The Govt is supposed to act for the greater good of citizens, something which they did not do. Now we have issues with petrol, jet fuel, road bitumen, and CO2 supplies which has taken things like frozen chickens off the shelves.
Yes, the $29.4 billion is for service imports which have been increasing massively and currently greatly exceed service exports. The increase in servicing imports is probably influenced considerably by the pent up demand by NZers for overseas travel and OE.
KeithW
https://i.stuff.co.nz/environment/climate-news/132315080/government-sho…
this probably won't help the Govt deficit
Thought this bit was hilarious.
"Some climate experts say emitters and investors lost faith in the system because they buy units not just for the pollution created this year, but based on how scarce and expensive they think the carbon credits will be in future."
They could have just said a few speculators have been caught out.
Investors, lol.
The country may need to maintain a weaker NZ dollar and higher interest rates to bring the ledger back into balance.
I'm fascinated when I hear commentary on interest rates from economists and banks and other armchair experts why they are already talking interest rates down - I saw earlier in the week - that one bank is predicting a new normal OCR of 2.5% by end 2024 - really.
I personally would be shocked if the new normal is any less than 4% - NZ still has a large debt problem - which will be assisted by holding interest rates higher to encourage inflows of money.
A failure to move the balance of payments closer to less than $15 billion in the next couple of years (i doubt we will see a positive balance in the next 4-5 years with Chinas issues) will end up with a downgrade by ratings agencies which would result in a lower dollar anyway - effectively doing the RBNZ's dirty work for them.
Consider the foundation of our lifestyle, the financial system. The story is "debt doesn't matter," because we can outgrow rising debt forever. Our bag of financial engineering tricks is bottomless, and there will always be another financial rabbit we can pull out of the hat. This is of course a fantasy. Debt eventually eats the system alive. So do fixed costs, entitlements, demographics and declining productivity. The inputs and processes can't be changed in any material way because they have to remain in their current scale and configuration or the financial system collapses under its own weight. (CH Smith)
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