Exports have long made a major contribution to New Zealand's economy. As a comparatively 'open' economy, increasing exports as a proportion of our GDP has been identified as a way of building prosperity beyond the confines of our relatively small domestic market. Creating a more diverse array of income streams also offers the chance of a more stable economic environment over the longer term. In addition, generating our own energy sources adds a level of security by reducing New Zealand's exposure to energy imports.
New Zealand is a small open economy dependent on commodity exports. Exporting allows businesses to access far larger markets than the domestic economy, providing economies of scale and allowing specialisation in areas of competitive advantage.
By value, half of our exports are milk powder, butter, cheese, meat, logs and fruit. Fifteen percent of exports are from dairy alone. These sectors have served New Zealand well for decades, and will continue to do so, but they expose the national economy to risks in terms of international commodity price movements, shifts in market preferences or market access, or climatic change.
As a country, if we export more, we earn more. It also means we borrow comparatively less to pay for our imported goods. That puts the country in a much better economic position, fostering greater business confidence and stimulating a positive environment for more growth and jobs, and the myriad benefits that accrue from greater economic activity.
Alternatively, trade deficits (higher net imports) can lead to a growing national debt burden, and increased debt servicing costs. This in turn can lead to higher interest costs to finance debt on the international market, all of which act to suppress or mute economic growth. Also if government's debt loading increases in proportion to its revenue, the relative cost of repaying that debt can impinge on it's ability to pay for essential public services.