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Summary
- Annual balance of trade data shows a surplus of NZD 2.2 billion for the year ended October 2020, the highest number recorded in the last 28 years.
- Goods exports increased by 1.2% while imports decreased by 10%, annually in October 2020.
- Backed by declining imports due to the pandemic related restrictions, trade balance has been resilient.
- The trade surplus is likely to get absorbed into the economy and would disappear over time.
New Zealand’s trade surplus data for the year ended October 2020 has shown a surplus of NZD 2.2 billion, a figure not seen since 1992. This came as imports declined due to the pandemic related restrictions. Increase in exports over the course of one year has also eased the export-import gap adding to the improvement in the surplus.
The yearly imports dropped by 10%, moving the import value down to ~NZD 58 billion in the year ended October 2020. Goods exports have also increased for the reported period by 1.2% to ~NZD 60 billion. The annual trade balance for the period was recorded at NZD 2.2 billion, biggest surplus since July 1992.
Monthly comparison of October 2020 with October 2019 shows a 4.4% decline in exports to NZD 4.8 billion. The same comparison reveals that imports have fallen by 13% to NZD 5.3 billion.
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Trading Partners and Decline in Imports
Imports from key partners like China, USA, EU, Australia, and Japan have declined leading to the above results. Imports from China consists of electronic equipment, machinery, clothing and iron and steel products.
While imports from Australia include machinery, inorganic chemicals, vehicles, etc. These have been severely impacted by the restrictions on cross country trade under the pandemic, and because of a contracted demand.
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Based on the monthly comparison, New Zealand exports to China, Australia and Japan have declined, while the exports to USA and EU have increased by NZD 69 million and NZD 34 million, respectively.
Key exports that were hurt comprises of products like milk, meat, and aluminium. Whereas exports have shown strength in items like aircraft and parts, respiratory equipment, and wood.
What Does A Surplus Mean For The NZ Economy?
The balance of trade surplus comes largely because of declined imports. However, it is important to note that the slump in imports might only be a temporary one as they may rise when borders open and restrictions are eased.
Countries across the globe are experiencing a contracted demand. With job losses on the rise, consumers are hesitant to spend their money. Therefore, once demand increases, there would be subsequent alterations to imports as well. The NZ economy is highly dependent on trade; therefore, any major slowdown is only temporary.
With New Zealand signing the RCEP (Regional Comprehensive Economic Partnership) few days ago, simulations to the trade flow are highly anticipated. An export led growth would mean that the New Zealand economy has shown resilience and has a long-term trade surplus to look forward to.
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