Value of merchandise trade exports

IBISWorld forecasts that the value of merchandise trade exports will rise by 4.8% in 2024-25 to reach $72.26 billion. The New Zealand-European Union Free Trade Agreement (NZ-EU FTA) came into force in May 2024, which will boost demand for New Zealand's exports in 2024-25. The NZ-EU FTA will allow growth in dairy and beef exports, areas where it has historically been constrained by limited quotas and high tariffs. Growth in dairy export prices and production of domestic dairy products will lead to an increase in dairy export revenue, while international demand increases for beef will push up beef export prices. Both these trends will fuel the expansion in value of merchandise trade exports expected over 2024-25.

The New Zealand dollar has depreciated over the past five years, supporting increased demand for New Zealand's products in international markets. The majority of New Zealand's export value is derived from its dairy, agricultural and forestry sectors. Collectively, these sectors are expected to account for over 70% of New Zealand exports by value in 2024-25.

The long-term growth in the value of merchandise trade exports was stunted in 2020-21 due to the complications caused by the pandemic. Demand fell across the global economy, while market oversupply caused prices for many key export commodities to drop. However, a quicker-than-expected economic recovery in China helped constrain the fall in exports during the year.

Dairy products, particularly cheese, butter and milk powder, represent New Zealand's largest export segment. Dairy prices rose strongly between 2019-20 and 2022-23, boosting dairy exports both in value and as a share of total New Zealand exports. Many Asian middle-class markets have expanded significantly over the past five years, particularly in China. New Zealand dairy products tend to be viewed as premium alternatives in these markets, which has driven overseas demand for domestically produced raw and processed products. In particular, milk powder exports have grown substantially, especially in 2021-22. High growth in milk powder export prices and sustained demand from the Chinese market helped total merchandise exports to bounce back after the pandemic-induced decline in 2020-21. The signing of the Regional Comprehensive Economic Partnership (RCEP), which came into force in January 2022, and the removal of dairy product tariffs in the New Zealand-China FTA in January 2024 have also supported growth in exports to the greater Asia-Pacific region.

The value of merchandise trade exports fell by 4.4% in 2023-24. The entry into force of the New Zealand-United Kingdom Free Trade Agreement (NZ-UK FTA) in May 2023 provided a boost to overall trade volumes. While dairy and meat exports increased in volume, sharp declines in prices that had supported record export revenue in previous years caused the total value of exports to decline. Overall, IBISWorld forecasts the value of merchandise trade exports to increase at a compound annual rate of 3.6% over the five years through 2024-25.