ECONOMIC UPDATE

by Nick Clark
31 March 2017

There was another monthly goods trade deficit in February, according to Statistics NZ’s Merchandise Trade Statistics.  

In the month of February 2017 goods exports were 4.0 billion, down $232 million on February 2016 (or 5.5 percent) and goods imports were also $4.0 billion, up $154 million (or 4.0 percent).  This left a small deficit of $18 million.   

The main reason for the fall in goods exports (and for the deficit) was the export of an oil drilling platform in February 2016.  Excluding that one-off effect exports would have been up $35 million and there would have been a surplus.  Surpluses are typical for February months.

Exports of milk powder, butter and cheese were $1,041 million in the month of February, up $55 million on February 2016 (or 5.6 percent), while meat exports were $683 million, up $28 million (or 4.4 percent).

For the year ended February 2017 goods exports were $48.3 billion, down $1,276 million (or 2.6 percent) on the year ended February 2016, while goods imports were $52.1 billion, down $775 million (or 1.5 percent).  This left an annual deficit of $3.8 billion, the largest in eight years.

Annual exports of milk powder, butter and cheese were $11.3 billion, down $334 million (or 2.9 percent) while meat exports were $6.0 billion, down $756 million (or 11.8 percent).

Twelve of New Zealand’s 15 regions recorded nominal GDP increases in the year ended March 2016, according to Statistics NZ’s annual Regional Gross Domestic Product Statistics.

The largest percentage increases were in the Bay of Plenty (7.7 percent), Auckland (6.0 percent), and Otago (4.8 percent). The national increase was 4.1 percent, 4.4 percent for the North Island and 3.0 percent for the South Island.
 
Decreases were recorded in Taranaki (8.5 percent), the West Coast (2.8 percent), and Southland (1.0 percent).  These decreases reflected a fall in mining and agriculture activity, mainly from the impact of lower international prices for oil, coal, and dairy products.  

Despite its large fall Taranaki remained the region with the highest GDP per capita ($71,297).  The lowest was Northland ($36,531) followed closely by Gisborne ($36,955).

There was strong growth in research and development (R&D) spending between 2014 and 2016 but it still seriously lags the OECD average, according to Statistics NZ’s two-yearly Research & Development Survey.  

Total spending on R&D by businesses, government, and higher education was $3.2 billion in 2016, up $531 million (or 20 percent) from 2014. R&D in the higher education (university) sector lifted 18 percent and government R&D had a modest 5 percent rise, but the bulk of the growth was from a 29 percent increase in business spending.

R&D in the primary sector amounted to $542 million, up 22 percent on 2014, and made up around 17 percent of total R&D spending.  $266 million was done by businesses (up 36 percent), $214 million by government (up 11 percent) and $62 million by higher education (up 7 percent).

New Zealand’s total R&D spend was 1.28 percent of GDP.  Although this is up from 2014’s 1.17 percent it is well below the OECD average of 2.40 percent.

Exchange Rates

NZ Dollar versus  NZ Dollar versus  
(30/3/17)
 Last Week  
(23/3/17)
Last Month  
(28/2/17)
Last Year 
(30/3/16)
US Dollar
 0.7029
 0.7029  0.7182  0.6863
Australian Dollar  
 0.9166 0.9183
0.9361
 0.8991
Euro
 0.6537  0.6517  0.6788  0.6074
UK Pound
  0.5652  0.5636  0.5778  0.4771
Japanese Yan
 78.27  78.37  80.88  77.25
Chinese Renmimbi    
 4.8430  4.8408  4.9351  4.4685
Trade Weighted Index    
76.34
 76.39  78.32  72.88
Source: Reserve Bank of NZ
​

Wholesale Interest Rates

  This Week
(30/3/17)     
Last Week
(23/3/17)     
Last Month
(28/2/17)     
Last Year
(30/3/16)
OCR
 1.75%  1.75%  1.75%  2.25%
90 Day Bank Bill    
 1.99%  1.97%  2.00%  2.34%
10 Year Government Bond    
 3.18%  3.22%  3.24%  3.01%
Source: Reserve Bank of NZ