Paying our way again

December 20, 2013

New Zealand’s GDP increased 1.4% in the September quarter on the back of dairying.

The strong increase in dairy production was the main contributor to a 17.0 percent rise in agriculture, which makes up about 5 percent of the New Zealand economy.

“Dairy farming has really bounced back from the drought this year,” acting national accounts manager Steffi Schuster said. “The increase in agriculture is the largest in more than 25 years, as good weather boosted production well above the weak June quarter.”

Dairy product manufacturing also increased this quarter, which contributed to a 1.5 percent rise in total manufacturing. While manufacturing production was up, exports of dairy products fell this quarter, leading to a build-up of inventories. The $770 million increase in total inventories this quarter is the largest build-up since the series began.

Increases in agriculture and manufacturing production were partly offset by declines in:

  • Construction (down 1.0 percent), as falls in infrastructure and commercial construction outweighed an increase in housing construction. Investment in housing was up 8.5 percent from the previous quarter.
  • Business services (down 0.8 percent), with most sub-industries down, except for architectural and engineering services.

Economic activity for the year ended September 2013 was up 2.6 percent.

The expenditure measure of GDP was up 1.1 percent in the September 2013 quarter. The main movements were:

  • Investment in fixed assets (up 3.1 percent), driven by increased imports of plant, machinery, and equipment. This was also reflected in a 4.5 percent rise in imports of goods and services.
  • Build-ups in manufacturing and distribution inventories, as supply of goods exceeded demand this quarter.
  • Volume of spending by New Zealand households (up 0.4 percent), mainly due to increased spending on durables like furniture and motor vehicles.

A lot of the increased dairy production is going to China which in November passed Australia as our New Zealand’s top goods export destination on an annual basis.

“China is now our top export destination on an annual basis, just under two years after it became our top annual imports partner in December 2011,” industry and labour statistics manager Louise Holmes-Oliver said.

In November 2013, goods exports were valued at $4.5 billion, up $647 million (17 percent) from November 2012. Exports to China hit record levels in October 2013 and November 2013. Exports to China were valued at $1.2 billion.

Dairy contributed the most (63 percent) to the total exports to China, valued at $774 million, in November 2013. This is the highest value of dairy exports to China for any month. Total dairy exports were valued at $1.7 billion – also the highest for any month.

The value of imported goods was $4.3 billion – down $124 million (2.8 percent) from November 2012. A fall in intermediate goods, due to crude oil, affected this movement. Consumption goods also fell, while capital goods rose.

The trade balance for November 2013 was a surplus of $183 million (4.1 percent of exports). This is the first trade surplus for a November month since 1991. This follows a trade deficit in October 2013, which was the lowest deficit for an October month since the mid-1990s. . .

The lowest trade deficit for October since the mid 1990s and the first trade surplus for November since 1991 signals an encouraging trend back to paying our way again.

We can’t produce all we need and we can’t consume all we produce.

Sustainable growth depends on producing and selling goods and services of greater value than those we need, or want, to buy.

We haven’t been doing that for far too long.

This news from Statistics New Zealand and a survey from Export New Zealand showing a lift in exporter confidence, in spite of the high dollar, indicate a welcome change to that.


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