In wake of dairy price slump, Economic Development Minister says Govt may reduce target of lifting exports to 40% of GDP, citing shifting stati

By Bernard Hickey

Economic Development Minister Steven Joyce has flagged a review of the Government's flagship target of lifting exports as a share of GDP from 30% of GDP to 40% of GDP by 2025.

Joyce told reporters after wholemilk powder prices fell 13.3% overnight that officials were reviewing the target after Statistics New Zealand revised one of its measures of exports to GDP down by around 4% of GDP.

"Statistics New Zealand re-rated the export data so we're going to have a look at that target because it's been re-based four percent lower," Joyce said before Question Time in Parliament.

"We are determined to lift it over time, but it was always going to be more than a one year or two year or five year approach, because these changes occur over a 20 year period, which is why we set it so far out," he said.

"We're just looking at whether that affects our target. We'll just go and have another look. Is the 40% realistic now, given that 4% adjustment? Or will we adjust it by up to 4%. We certainly wouldn't adjust it by any more than that," he said.

Joyce denied the Government would shift the goalposts by more than Statistics NZ's revisions to its estimates of the export share of GDP.

"We'd only change it by the maximum of what's actually been shifted," he said.

"We've got some advice coming from officials, but we want to make it a target that's achievable, and if the whole historical series has completely changed, then you might want to make a bit of shift."

Joyce rejected suggestions that the Government's Business Growth Agenda was not lifting the export share. Some business leaders and opposition politicians have criticised Reserve Bank policy, which they say has elevated interest rates and the currency, and the Government's approach to R&D spending.

Reserve Bank Governor Graeme Wheeler has repeatedly warned over the last two and a half years that the New Zealand dollar was unjustifiably and unsustainably high. Wheeler even warned last month that a "substantial downward correction in the real exchange rate is needed to put New Zealand’s external accounts on a more sustainable footing."

Joyce said the Government was making progress over the longer term.

"I think we're making some very good progress. Not withstanding the drop in dairy prices, we're seeing some significant lifts in a whole range of other industries. How soon it flows through to the percentages is an interesting question in itself because we're getting quite strong GDP growth at the moment," Joyce said.

"Last year we had NZ$50 billion of goods exports last year -- first time ever -- and services exports are growing well too," he said.

Export share flat under old and new measures and nominal and volume measures

Statistics New Zealand GDP project manager Daniel Lensen said via email that Statistics New Zealand had implemented new international standards and updated the base "expression" year in its December accounts. This had reduced the nominal export share of GDP by around 0.5%, but figures for the volume measure of exports to GDP had fallen by 3-4%.

"The international standards increased nominal GDP, with little effect on exports, so reduced the nominal share of exports in GDP by roughly 0.5 percentage points in recent years," Lensen said of the nominal exports to GDP measure, which he said was the preferred measure.

Statistics New Zealand's 'old' measure of nominal exports to GDP showed it has fallen from 32% to 30% between September 2008, just before the National Government was elected, and the December quarter of this year.  Its new measure of nominal exports to GDP showed it falling from 31% to 29% over that period. The volume measure showed the export to GDP share rising from 32% to 33% under the old measure and being flat at 29% under the new measure.

This MBIE document from August 2012 on 'Building Export Markets' repeatedly refers to the target increasing the export share of GDP to 40% by 2025, but does not specify which particular measure it was referring to. It includes a chart on page 9 showing nominal exports to GDP and real exports to GDP.

The two charts below show firstly the old and new nominal measures of the export share and then the old and new volume share underneath.

Nominal exports to GDP down from 32% in 2008 to 29% in 2014 (little changed by revisions)

Volumes of exports to GDP flat at 29% between 2008 and 2014 (revised down from rising from 32% to 33%)