The deficit between what we get from our exports and what we spend on imports has, on an annual basis, grown to its highest level since the record high of 2008 during the Global Financial Crisis.
Statistics New Zealand reported that our annual current account deficit to June was 7.7% of GDP, which is just below the highest ever deficit-to-GDP, 7.8% recorded in December 2008.
The 7.7% figure is somewhat higher than economists were picking, with a market consensus forecast of 7.5%.
Going back to the start of the pandemic in 2020, a big fall in our imports saw the annual current account deficit rapidly shrink, getting down to just 0.8% of GDP by December of that year.
However, as imports have surged again since, the current account deficit has been rapidly increasing. For the June 2022 year it hit a new high in dollar terms of of The relatively low imports arriving in New Zealand this Covid year have helped the deficit between what we get from exports and what we spend on imports to shrink to the lowest level since 2001.
In dollar terms, for the year ended June 30, the annual current account deficit was $27.8 billion, $16.3 billion wider than in the year ended 30 June 2021 (3.4% of GDP).
The largest annual current account deficit prior to the Covid pandemic was $14.7 billion in the December 2008 year during the global financial crisis (7.8% of GDP).
In terms of quarterly figures and comparisons, the seasonally adjusted current account deficit narrowed by $1.7 billion to $7.1 billion in the June 2022 quarter, from $8.8 billion in the March 2022 quarter, Stats NZ said.
It said the narrowing was mainly due to a $2.8 billion rise in the exports of goods and services, offset by a smaller $785 million rise in imports of goods and services.
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48 Comments
What are we going to do when the rest of the World hits a recession, and cuts back on what they import from New Zealand, yet we have little choice but to keep importing from them?
I suppose we'll have to get out ahead of that with punitive interest rate rises, or 7.7% might seem like the Good ol' Days, looking back.
Only a very tiny percentage of the world would need to go on a diet as our food exports are tiny on the world scale. The ones on a compolsory diet don't buy from us anyway. The one thing we have in our favour is we cater for the wealthy so as long as the rich get richer we are alright.
You're right but we don't export "food" to the wealthy - the bulk of our exports are in commodity form that then serve as ingredients for those catering to the rich.
For example, high-end restaurants in China are some of the biggest buyers of our meat exports and so previous lockdowns in China hit meat farmers particularly.
Yes, we risk being wiped out by technological innovations such as vertical farming.
There is massive public and private funding chasing "sustainably" grown food and we aren't the solution to that problem.
A 2020 paper from The Kellogg Rural Leadership Scheme highlighted that our dairy industry was ripe for disruption thanks to precision fermentation, a process that can replicate milk proteins in a cheaper and more climate friendly manner.
Still early days on all this but do we want to bet our entire economic future against technological advancements.
And if you don't believe it, have a listen to George. if I recall his figures are 26% of world landmass used to produce 1% of protein. It has to change and will change rapidly.
Of course we have a diverse economy.
We have houses on flood plains. Houses in earthquake zones. Houses in coastal areas. Houses on lifestyle blocks. Infill housing. Apartment blocks. Bog standard urban housing developments. Emergency housing. All of different colours, cladding, age. And all propped up by lending from not 1, not 2, not 3 large banks, but 4.
We'll be fine.
Hamish,
presumably Scottish like me. You forgot that many of these edifices leak like sieves. I have done a bit of work on this. As far back as 2008, a PWC report for the government estimated the number of properties affected to be some 42,000, with a remediation cost of $11.30bn. Others put much higher figures on both numbers. In 2013, legal action was being taken against architects and builders involved with 87 of the 309 schools with leakiness issues.
As some have said, we have a property based economy with some real activity tagged on to it.
With every free trade deal that we sign the problem only seems to get worse. We have been the only country in the world to remove all tariffs and restrictions on what we import. We have opened ourselves up to be exploited by every other country and a free for all to buy up our assets and businesses. We are just a minnow in a sea of sharks.
Maybe if we stopped selling wildly-overpriced houses to each other, and started allocating more capital and resources on producing and exporting goods and services instead, we might have a chance at a more economically sustainable and balanced economy, rather than an 18-th century-type of economy and mindset reliant on the housing Ponzi and its associated parasitic specufestors.
We have a sovereign currency which means that we don't operate on a fixed exchange rate or borrow in foreign currencies. Greece operates in a foreign currency namely the Euro which it doesn't issue and Sri Lanka also borrows in foreign currencies.
https://www.levyinstitute.org/pubs/Wray_Understanding_Modern.pdf
The hope is that the more we bugger our economy the more our dollar drops and props up our exports - problem is it also crucifies consumers and makes being a producer an expensive business - bit of a downward spiral really - eventually we get a downgrade and then our debt gets harder to find - we’ve been here before but WW2 saved our bacon.
Arderns Govnt and Savages have more in common than most people realise.
New Zealand punch’s way above its weight with innovation and food production it’s time we and government back ourselves and invest more into businesses highlighting exports we are 0.000625% of world population surely we can focus and produce something to sell to other 99.999375 %of the world. it would not take much to lift average wages and support society and help people out of poverty
https://www.stuff.co.nz/business/industries/9167703/NZ-can-learn-from-I…
"You are clearly harvest driven, stuck in the box of cheap labour and the only answer is to cut costs... if you keep on this strategy you are... just stuck."
Knutsson says New Zealand's industry is at the same place Iceland's was 30 years ago - blaming high currency for all its woes.
Great graph!
NZ is importing far too much relative to its GDP. The trend is very worrying.
How can NZ pay back its ever increasing debt when imports are so out of kilter with exports?
Why did NZ shut down Marsden Point oil refinery & shut down gas exploration?
Why are we importing coal from Indonesia & not mining it ourselves?
Surely NZ needs to reduce it’s reliance on imports for its coal, oil & gas.
The Reserve Bank’s excessive printing of money & cheap FLP loans to banks as well as excessive government spending has caused an artificial feeling of wealth, resulting in massive overspending on imports.
Watch out for a continued decline in NZD as stagflation (high inflation, no GDP growth) likely to hit in 2023 and beyond as the NZ government has no credible plan to increase GDP & exports so that it can reduce its reliance on imports.
I think you are saying we live above our means. The USA has the worlds reserve currency and has been able to export its inflation since 1971 (so far and Ronnie Reagan's famous quote, "deficits don't matter'). We do not have that luxury, we only have a puppet communist government, printing money, with declining productivity, increasing debt , inflation soaring, all at the mercy of globalization (WEF?). Imports? Why do we need imports?
"A puppet communist government", I say, rather hitting the nail on the head, there. Not sure about communist exactly, her dark masters seems to have incorporated the thought process of the European fascists and the communists. So Brave New World and 1984 combined. "You will own nothing and you will be happy". Or you will either be dead or genetically modified to know your place and accept it gladly. "Got to get rid of the excess eaters" seems to be their central tenet.
oh man, you've bought the "sir john key playing golf with barack" myth, hook line and sinker, and now sell off the silver luxon....right wingers(or should I say whingers) use socialism as a pejorative even while they phone for a socialist st johns ambulance...
our inflation stacks up pretty well globally reflecting the pandemic response even the IMF praises...key only got by on cullens planning...our PMs lost the plot in transparency but housing is the nats f'up....woke is an issue but rather woke than grammar school yuppies...
That's what happens when you import dirty coal and trash someones else environment as opposed to using your own resources.
The fact that our resources might cost more is irrelevant as the higher price provides more incentive to transition. The impact on the planet is nil, as the coal was going to be burnt any way, and if our coal was cleaner then isn't it better?
Also lets kill the dairy industry and then wonder why our current account deficit worsens.
lets remove the tax on petrol to ensure that people don't have to reduce consumption, thats really going to help our current account deficit.
Lets import more more medicines at the same time as the above and wonder why our current account worsens.
It is hard for the government to try and meet everyones needs and not reduce there standard of living, however everyones standard of living will need to fall to reduce our impact on the planet and balance our current account deficit.
I guess no one wants to spell it out, if we consume more than we earn then we are living beyond our means.
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