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Falling exports to Australia knock NZ balance of trade

Wednesday 26th September 2012

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New Zealand recorded a bigger-than-expected trade deficit in August, with petrol and machinery exports into Australia shrinking in the month. The trade deficit was $789 million in August from a revised surplus of $97 million a month earlier, according to Statistics New Zealand.

That shortfall between exports and imports was wider than the $606 million forecast in a Reuters poll of economists. The annual deficit of $866 million was bigger than the expected $770 million.

Exports fell 3.4 percent to $3.32 billion in August compared to the same month a year earlier, with a 17 percent slide in sales to Australia. New Zealand's neighbour is also its biggest trading partner, with annual exports of $10.27 billion and imports of $7.29 billion. Foreign sales of crude oil sank 32 percent to $128 million last month on a seasonally adjusted 28 percent fall in the quantity sold.

Oil export and import figures can be distorted by the timing of individual shipments. Other petroleum products more than halved to $23 million from the same month a year earlier. Machinery and equipment exports dropped 31 percent to $138 million in August.

Milk powder, butter and cheese, and casein and caseinates account for some $12.81 billion in annual exports, or 27 percent of all of New Zealand's merchandise exports. The volume of milk powder, butter and cheese fell a seasonally adjusted 16 percent to 264,000 tonnes.

That comes as diary exporter Fonterra Cooperative Group today said it missed its forecast payout to farmers due to weaker milk prices and a stronger New Zealand dollar. The Auckland-based company will make a payout of $6.40 for a full shared-up farmer made up of a farmgate milk price of $6.08 per kilogram of milk solids and a dividend of 32 cents a share.

The farmgate milk price was $7.60 a kilogram a year earlier. The currency recently traded at 81.90 US cents from 82.03 cents immediately before Fonterra's result. New Zealand's imports slipped 0.4 percent to $4.1 billion last month, with China still the biggest supplier at $692 million.

ASB economist Jane Turner said the recovery in imports and weaker commodity prices has eroded the national trade surplus which will continue for the rest of the year. "As a result of the US drought we now see scope for recovery in NZ export prices for meat and dairy over 2013," Turner said. "This should result in the trade balance stabilising and potentially moving back into a small surplus in 2013 (depending on the performance of other export areas)."

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