ECONOMICS : Did Export Year 2007 Measure Up?

Export Year 2007 formally ended not at midnight on 31 December, but at the New Zealand Export Awards on 15 November. While the official programme might be over, government agencies have hastened to assure us the initiative was not one-off event. The work started during 2007 would continue, with shared vision and commitment outlined in “Export Year 2007: Platform for the Future”, document developed in partnership by Government and the ponderously named Export Year Private Sector Reference Group.
Export Year 2007, lest you hadn’t noticed, was joint initiative between Government and the private sector. Those promoting it insisted the partnership “raised awareness of exporting in the business community” and it delivered “a solid platform from which we can continue to build our export performance”.
Certainly it gave government politicians solid platform for strutting their stuff. Economic Development Minister Pete Hodgson attended the Export Awards function to say Export Year had provided “a great focus on exporting and the challenges that New Zealand faces in this regard”. It had seen the implementation of “a considerable number” of initiatives, policies, and awareness-raising activities that would provide platform for long-term growth. New Zealand’s “next generation of exporters” also benefited, the minister enthused. He cited the development of the “Thinking Globally” teaching resource for primary and secondary schools and – curiously – brayed that “children can now learn about the importance of trade for New Zealand and gain an appreciation for New Zealand’s position in the global economy”. We can only puzzle at why teachers had to wait until 2007 to teach such basic stuff.
But what did Export Year achieve when it comes to our trade balance? Not much, at first glimpse. The Government’s Export Year ballyhooing coincided with the exchange rate running hot, and – as Hodgson is all too aware – there is no easy way of resolving the currency problem, or to achieve an exchange rate level which meets all of the country’s economic objectives. He advised business people against relying on low New Zealand dollar for export success. “In the long term high exchange rate may well be the price we pay for strong economy,” he said at the Export Awards, remark that took no account of our massive balance of payments deficit. If living off the savings of others is prerequisite for strong economy, then let’s borrow more.
The latest available figures at time of writing show the current account deficit was $5174 million in the September 2007 quarter. This contributed to September-year deficit of $14,234 million (8.3 percent of GDP), up from $13,682 million (8.1 percent of GDP) in the year to June 2007 and $14,030 million (8.8 percent of GDP) for the previous September year.
The country’s liabilities exceeded assets to the tune of $151.1 billion at 30 September, $2.4 billion larger than three months earlier.
Alas, all that Export Year stuff put precious little oomph into our merchandise goods performance. Exports were up $10 million during the quarter but imports were up $18 million and – more troubling – the increase in the value of exported goods flowed from higher merchandise export prices. Export volumes declined during the quarter.
The price of dairy products, of course, was among those to increase during the quarter, but this was more than offset by fall in dairy volumes, leading to an overall decrease in the value of dairy exports. The value of non-food manufactures also fell during the quarter due to decrease in export volumes.
Good things were happening, but they didn’t owe much to Export Year carry-on. The most significant movement during the September quarter was the increase in export volumes of petroleum and petroleum products, resulting from the commencement of production at the Tui oilfield.
The latest available figures showed the value of merchandise exports in October was $3.4 billion, up 26 percent on October 2006 and record export value for an October month. This looked promising. Closer examination, however, shows the charge was led by milk powder, butter and cheese. With recent increases in domestic oil production continuing to flow through into exports, petroleum and products showed the next largest increase.
The currency played part in those results. According to the Reserve Bank’s Trade Weighted Index, the New Zealand dollar rose 4.2 percent in October 2007 from September and was 6.9 percent higher than in October the year before. At least partly as consequence, export income growth slowed to just 3.4 percent in the October year. This was sharp slowdown from 11.1 percent year earlier, notwithstanding the huff and puff of Export Year.

Bob Edlin is regular contributor to Management.

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