There won’t be many exporters sad to see the back of September, after New Zealand recorded its largest monthly trade deficit and was the second month in a row to show a significant monthly trade shortfall.
But it’s not as bad as it sounds: witnessing a trade deficit during September isn’t unusual. In fact, it’s a notoriously low point in the export calendar particularly for dairy and meat – industries that usually make up around $1 billion worth of New Zealand’s exports each month. Pair that with the import cost of fuel and other products and it’s no wonder September was tough on international operations.
Inevitably, our small businesses felt the impact too, with the latest Xero Small Business Insights (XSBI) data showing a -28.8 percent change in the total dollar value of imports and exports for the country’s small businesses from August to September 2018.
The country’s total number of imports in September was rated the highest value on record at $5.9 billion compared with $4.3 billion for exports. However, the total dollar value of imports and exports for small business in September was down 21.29 percent compared to September 2017.
As I’ve said before, we’re a trading nation. Importing plays a huge role in our economy because, despite the number of growing enterprises, we can’t produce everything that consumers want and therefore we require a steady relationship with those in the global marketplace.
The weakening of the New Zealand dollar this year dulled our appeal to global importers and exporters. The Kiwi dollar is currently sitting at US$68.31 (mid Nov 2018) following a level of US$64.4c (early Oct 2018) - its lowest point since early 2016. However, despite the recent bounce back, the major decline has left many economists believing it likely that most of the damage has already been done.
It’s important to note that the Kiwi dollar may not be bad news for all sectors, as economists claim the relatively weak dollar could work in their favour moving forward. High prices for livestock feed in Europe after an abnormally dry summer could see an increase in production and demand from Kiwi farmers to overseas suppliers.
Looking ahead at global changes, the introduction of a GST levy to integrated online retailers next year for goods worth $1,000 or less, could also benefit 26,000 small retail businesses across New Zealand. These small businesses are currently on an uneven playing field, up against overseas suppliers who are selling and exporting the same product to New Zealand without GST added.
As a result of the change, it’s likely that SMEs will see an uplift from local consumers, who would be more inclined to shop locally to avoid paying a higher price for the same goods. This will be a welcome move by the Government in October 2019 when it comes into effect.
Previous XSBI data has shown us that October, November and December outperform the rest of the year significantly when looking at the total dollar value of imports and exports within New Zealand small businesses. We look forward to seeing what the data reveals for these months in 2018, and how this compares to a difficult, yet predictable, September.
This article was prepared by Xero using Xero Small Business Insights data, for the purpose of informing and developing policies to promote small business in New Zealand. It contains general information only and should not be taken as taxation, financial, investment or legal advice. Xero recommends that readers always obtain specific and detailed professional advice about any business decisions.