Trade deficit narrows as tourism sector continues comeback

The tourism industry is growing again. Photo / Getty Images

New Zealand’s trade deficit narrowed to $3.2 billion in the March 2023 quarter, compared with $3.9b in the March 2022 quarter, Stats NZ said today.

The main contributor to the narrowing of the deficit was an increase in travel exports (tourism), which increased 385 per cent compared to the March quarter of last year, to $3.8 billion.

Travel exports represent the amount spent by visitors in New Zealand during the period.

”Travel credits continue to climb as international travel patterns return to normal” international trade manager Alasdair Allen said. “However, they are still not quite back to pre-Covid levels”.

The trend is promising for the rebalancing of the New Zealand economy, with concerns having been raised by economists about the nation’s current account deficit reaching worrying heights (at 8.9 per cent of GDP).

The current account is a broader measure of economic inflows and outflows which includes trade and financial transactions.

Full current account details are due on June 15.

There were some concerns in the trade data though with export prices falling sharply - part of a global trend as pandemic-era inflation abates.

Both export prices and import prices fell sharply in the quarter, ANZ economist Susan Kilsby noted.

That will be good news for the inflation fight.

The price of virtually all export goods fell, with meat prices down 8.2 per cent, while dairy prices fell 6.8 per cent quarter on quarter, she said.

On a seasonally adjusted basis, returns from forestry goods also fell sharply down 12.6 per cent quarter on quarter.

“Returns for export goods were negatively impacted by reduced demand due to the lockdowns in China earlier in the year,” she said.

Offsetting that, the price of imports fell 5.4 per cent quarter on quarter due to a significant drop in energy prices.

Imported petrol prices fell 12.8 per cent while iron and steel dropped by 12.3 per cent. Import volumes jumped 6.7 per cent driven by petrol. Virtually all other import categories fell.

“Lower prices were seen across most imported goods categories alongside more restrained spending on imports (aside from petrol) is consistent with slowing tradable inflation in quarter one,” she said.

“Export prices are expected to continue to ease in price during the second quarter of 2023.”

Total exports of goods and services for the March 2023 quarter were $24b, up from $19.7b in the March 2022 quarter, Stats NZ said.

Total imports of goods and services for the March 2023 quarter were $27.2b, up from $23.6b in the March 2022 quarter.

The total two-way trade for the March 2023 quarter was $51.2b.

• Total exports of goods and services for the March 2023 quarter were $24b, up from $19.7b in the March 2022 quarter.
• Total imports of goods and services for the March 2023 quarter were $27.2b, up from $23.6b in the March 2022 quarter.
• The total two-way trade for the March 2023 quarter was $51.2b.