Brad Olsen warns New Zealand's trade could be hit by global economy facing weakest growth since pandemic started

An independent economist has warned New Zealand needs to keep a "close eye" on the global economy as it faces its weakest growth since the pandemic started.

New Zealand's exports weren't performing as well they were at the end of 2022, with meat and dairy exports falling "quite heavily" from the previous quarter. 

On top of this, economic conditions in Europe are also sluggish in 2023, thanks in part to the Russian invasion of Ukraine. 

Infometrics Principal Economist Brad Olsen told AM Early on Monday New Zealand's exports are starting to become sluggish as overseas demand slows. 

"We know over the last few years, New Zealand has been focussed on the team of 5 million, of course, the team of 8 billion globally sort of trumps us in size and we know that New Zealand is a small island nation at the bottom of the South Pacific that relies a lot more on trade," Olsen told AM Early host Michael O'Keefe. 

"Increasingly, if you're seeing other parts of the world that aren't growing quite as fast, there's not as much consumer demand, there's not as much consumer spending, we're not going to see the same levels of export growth." 

The Ministry of Foreign Affairs says trade is "critical" to New Zealand as it makes up 60 percent of our economy, which has seen calls for Aotearoa to keep a very "close eye" on how the global economy evolves. 

"We do have to keep a very close eye on how the global economy evolves because if they're not growing, they're not looking to buy quite as much," Olsen said. 

"At the start of last year, you were seeing expectations for global growth in 2023 of around about 3 percent, a healthy clip if you will, but coming through to the end of last year, rising inflation, rising interest rates, seeing global expectations sort of slip more towards one and a half percent, perhaps even lower, which certainly does highlight the pressure on keeping New Zealand exports going to the levels that would want to see them." 

Infometrics Principal Economist Brad Olsen.
Infometrics Principal Economist Brad Olsen. Photo credit: AM

Economic activity in North, Central and South America as well as Europe is expected to be constrained in 2023, with rising interest rates and slower economic growth weighing on exports in these areas, Olsen said. 

"It's very difficult to make stuff and produce stuff in Europe if you haven't got the natural gas or other energy means to produce it," Olsen explained. 

"So in general, we're seeing much more sluggish growth coming out of many of those sort of more advanced economies across the world who are often key parts of our export picture. They've got money, they want to buy, but maybe not quite as much this year."

One area that could see growth in 2023 is Africa and Olsen believes New Zealand needs to target this area in the medium and long term. 

"It's also not New Zealand's usual export trading ground and highlights that as an area of the world that continues to grow economically," Olsen said. 

"It's somewhere that New Zealand needs to focus on more in the medium to long term to ensure that we do have those sorts of trade connections into Africa as they start to become a larger, more important part of the economy."

Watch the full interview with Brad Olsen in the video above.