Jetstar effect hits NZ trade figures

The trade balance swung unexpectedly into deficit of $217 million in the June quarter – let’s call it the Jetstar effect.

The new budget airline imported a few aircraft, valued at $571 million, and without those there would have been a decrease of 8.7% in imports over the three months, Statistics New Zealand said today.

More significant than the Jetstar effect though is the fall in “intermediate goods” – a miscellaneous category which basically includes inputs into business.

These include fertiliser and other processed industrial supplies – down $228 million; processed fuels and lubricant, down $207 million, and parts and accessories of capital goods, down $191 million.

These fell 12.6%, or $634 million, over the quarter.

Capital goods imports rose $267 million, but this against-the-trend rise was due to the Jetstar effect. The crucial machinery and plant part of capital goods fell $262 million – 14.8% - which followed a 2.4% decline in the March quarter.

Imports of passenger cars, which have recently been on the decline, took an upward turn, rising by $57 million or 15.5%. This though is from a historically low level – imports have been around the $800 million a quarter for nearly a decade but slumped below $400 million in the last half of 2008.

On the export side the value fell 5.4% from the March quarter, which in turn fell5%.

The main contributor is the fall in dairy prices. The value of exports of casein and caseinates showed the largest drop, down by 21.9% – despite a 6.3% rise in the quantity exported. Milk powder, butter and cheese also fell, by 12.9% - again, despite a rise in quantities, in this case by 22.1%.

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Duncan Hamilton - forgive me but can you explain why the import of 4 planes by a 100% owned foreign company are taken in , in measuring NZ's current account deficit, especially when 100% of any profit that the said company makes is added to NZ's deficit whether or not the whole profit is actually repatriated to the parent Australia?

Already the negative minded commentators are having a field day talking about NZ's first deficit for some months and if you are lucky reluctantly mentioning why?

Milton Friedman it was (before Muldoon) who coined the phrase that the public wouldn't know what a current account deficit was if they tripped over it! How right he was - when are we going to fix it??
Duncan Hamilton

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