New Zealand's Imports Hit Lowest Level Since Mid-2021 Amid Economic Slowdown

New Zealand's imports fell to NZ$17.9 billion (US$11 billion) in the first quarter of 2023, marking the lowest level since mid-2021. This significant decline is attributed to a lethargic economy, as both households and businesses feel the weight of high interest rates. The country experienced a contraction in gross domestic product in the second half of 2023, pushing it into a double-dip recession.

The report showed across-the-board declines in most imports, with vehicles dropping 18%, machinery declining 12%, fuel falling 29%, and capital goods imports plummeting 25% due to a slump in business confidence. Imports in the year ended March 31 dropped 11% from the previous year, outpacing a 4.2% drop in the value of exports.

The Reserve Bank of New Zealand kept the Official Cash Rate at 5.5% and said it needs to maintain a restrictive policy for a sustained period to return inflation to its 1-3% target band. The weak economy has dampened consumer and business demand, leading to the significant decline in imports.

Why this matters: The sharp drop in New Zealand's imports reflects the broader economic challenges the country is facing, with high interest rates and a contracting GDP. This slowdown has implications for businesses, employment, and the overall health of the economy.

Dairy commodity markets have also softened, with prices remaining range-bound and lethargic demand being a key driver. However, better times are expected for dairy demand in many economies, though the speed of recovery will be critical. Beef and sheepmeat markets remain optimistic, with positive growth in exports, particularly to the US.

New Zealand's bilateral trade and economic relationship with South Korea, underpinned by the Korea New Zealand Free Trade Agreement (KNZFTA), is an area of both success and opportunity, with room for significant growth. In 2024, Korea and New Zealand will hold the KNZFTA Joint Commission and the Korea New Zealand Joint Economic Consultations. Korea's economic growth for 2024 is estimated at 2.4%, and the government's emphasis will be on stabilizing and revitalizing the economy.

The decline in New Zealand's imports to the lowest level since mid-2021 highlights the challenges the country's economy is currently facing. With high interest rates dampening consumer and business demand, and GDP contracting in the second half of 2023, the road to recovery will require careful navigation. As New Zealand looks to strengthen its trade relationships and explore new opportunities, the speed and effectiveness of economic policies will be crucial in determining the country's economic trajectory in the coming months.

Key Takeaways

• NZ imports fell to NZ$17.9B in Q1 2023, lowest since mid-2021, due to sluggish economy.
• NZ experienced a contraction in GDP in H2 2023, pushing it into a double-dip recession.
• RBNZ kept OCR at 5.5% to return inflation to 1-3% target, dampening consumer and business demand.
• Dairy markets softened, but beef and sheepmeat exports, especially to US, remain optimistic.
• NZ-Korea trade relationship offers growth opportunities, as Korea's economy is estimated to grow 2.4% in 2024.