New Zealand’s trade balance deficit swelled to a record high in October 2022 following a surge in imports of consumer goods and cars which showed domestic demand remained strong in the face of sharp interest rate hikes. Statistics New Zealand said the trade balance deficit increased to NZ$12.9 billion or US$8 billion by 31 October 2022. The value of imports jumped 25 percent from the previous year to NZ$84 billion (year-on-year/yoy), outpacing a surge in exports of 15 percent to NZ$71.1 billion. In addition, companies in New Zealand face higher global prices for fuel and other necessities, while a weaker local dollar only magnifies those costs.
New Zealand’s trade balance deficit. However, increasing volumes of imports of vehicles, mobile phones and personal computers indicate strong demand despite the central bank’s aggressive policy tightening over the past 13 months. As is known, the Reserve Bank of New Zealand is expected to raise its benchmark interest rate by 75 basis points to 4.25 percent at a policy meeting, Wednesday (23/11/2022). Doug Steel, senior economist at Bank of New Zealand, said the deficit was due to rising prices around the world.
“But there are signs of oversubscription and one of the responses has been to import more.” he said. According to him, there may be a factor in buying a lot of supplies before entering the busy Christmas and year-end holidays. Businesses in New Zealand are recording higher-than-usual inventory levels due to risks of future supply chain disruptions. Despite soaring imports, New Zealand dairy and sheep production has fallen, reducing prices for key commodities and limiting export growth. BNZ expects the trade deficit to widen further to around NZ$14 billion by the end of 2022. Vehicle imports rose 11 percent to NZ$10.9 billion in the year to October, the statistics agency said, seeing an increase in shipments of electric cars. Fuel imports increased sharply after the closure of the country’s only oil refinery in April, although this was offset by a complete halt in crude imports.