1 May 2012

Trade deficits predicted to continue

7:44 am on 1 May 2012

Economists are expecting a string of trade deficits with exporters' returns hampered by a persistently high New Zealand dollar and declining commodity prices.

Official figures show a seasonally-adjusted deficit of $787 million in the three months to March with export values falling 6% to $11.4 billion led by declines in dairy products, crude oil and fruit.

Imports, however, rose 3% to $12.2 billion due to higher crude oil prices.

ANZ New Zealand senior economist Mark Smith says the deficit is set to worsen.

"Given the combined influence of commodity prices and the currency we are likely to see a run of trade deficits going forward.

"This will be of some concern to authorities like the Reserve Bank who want a more export-led recovery. At the moment conditions aren't really in favour of that occurring."

Mr Smith says New Zealand is experiencing a double whammy with a high currency and softening commodity prices. In normal circumstances, he says, the two are linked.

He says at the moment the New Zealand dollar wins by default as New Zealand compares favourably with other more struggling economies.

"We're pretty much the best of a sickly looking bunch."

On an annual basis, the country recorded a weaker trade surplus of $207 million .