Or so it would seem from looking at the forecast tables accompanying today’s PREFU.
Recall that the government has long had a goal of materially increasing the share of New Zealand’s GDP accounted for by exports (with, presumably, a more or less matching increase in imports). As I’ve highlighted on various occasions – yesterday most recently – if anything the actual export share of GDP has been shrinking.
Here is the share of exports in GDP, showing actuals for the last decade or so, and Treasury’s projections for the next few years.
By the end of that forecast period, there will only be four more years until the goal of a much-increased export share of GDP was to be met. On these numbers, exports as a share of GDP would by then be at their lowest since 1989, 32 years earlier. So much for a more open globalising economy.
(The government actually specifies their target as the ratio of real exports to real GDP, while this chart is nominal exports to nominal GDP. Statisticians generally advise against using the real formulation. But on this occasion, it doesn’t make much difference either way. Over the five forecast years, the volume of exports is forecast to rise by 10.8 per cent, and real GDP is forecast to rise by 15.6 per cent. Whichever way you look at it, The Treasury expects the export share of the economy to carry on shrinking over the next few years.)
In many respects that isn’t very surprising. Treasury expects no fall in the exchange rate at all over the period, and they expect rapid increases in the OCR from around the end of next year. And they expect continued rapid population growth.
It is a non-tradables skewed economy, and while there is nothing intrinsically wrong with non-tradables, it isn’t usually a successful path for countries seeking to achieve higher productivity and sustained national prosperity. (Although Treasury does forecast that six years of zero productivity growth will finally come to an end, and we’ll have respectable productivity growth from 2019 onwards. What this is based on, who knows. We can hope I suppose.)