ASB Trade Disruptions Report: Wine, horticulture and a focus on climate action the bright points in a gloomy outlook for global and export growth

25 August 2023

  • Global economic growth forecast to halve from 6% in 2021 to 3% this year.
  • Weak demand for New Zealand exports, with the exception of wine.
  • Geopolitical challenges remain a key issue - with climate the new trade 'battleground'.

Climate is the new trade 'battleground'

Climate impacts, including extreme weather and rising sea levels, are disrupting supply chains, and climate action is becoming a lever for economies to gain trade advantages, according to ASB's annual Trade Disruptions Report.

Providing critical insights into import and export markets, the ASB Disruption Report highlights an increased focus on the development of energy technology, as well as 'trade wars' over clashes in climate policy. Europe and the United States are both fighting for investment through their respective green energy subsidies, pushing the world into a subsidy war.

"We need to get serious about the climate and be prepared for the climate to not only impact what we produce from our land and sea, but also for other nations to question whether we have acted effectively to reduce greenhouse gas emissions," says Paul Gestro, ASB International Trade Consultant.

"As a small trading nation at the bottom of the world we must maintain our licence to trade," says Mr Gestro.

Wine 2023's big export success story

Despite weather events and labour shortages, New Zealand's bumper wine vintage has driven some of our best trade performances of 2023, helping wine export volumes recover from last year's lows. Wine export values are running at a record high of $962 million for the year to 30 June 2023, and on track to exceed $2.5 billion by the end of this calendar year for the first time.

ASB Economist Nathaniel Keall says, "Despite the grim export outlook, we're seeing strong trade numbers coming from the viticulture sector with wine export volumes up 20% on 2022 so far."

Unlike some other New Zealand export sectors, both the wine and horticulture sectors have a well-diversified set of key markets, providing some insulation from a downturn in any single market.

Global supply chains have stabilised, declining demand new pain point for exporters

Supply challenges were the big trade issues of 2021 and 2022, and while global supply chains have stabilised, with shipping rates down by as much as 60-75% since 2021, with Mr Keall says slowing demand is concerning exporters.

"Today, our export revenue problems centre around a cooling domestic economy, a gloomy global outlook and an underwhelming Chinese economic recovery which we can no longer rely on."

Low demand for New Zealand exports has also weakened commodity prices, down 22% from June last year according to Bloomberg's Commodity Index - with wine and kiwifruit the exceptions.

Stable New Zealand dollar set to soften

It's been a remarkably smooth start to 2023 for the New Zealand dollar, but slowing global growth, softer commodity prices and shifts in interest rates in comparable markets will drag the New Zealand dollar down as the year progresses, according to ASB's latest Trade Disruptions report. 

Global growth forecasts remain low, with the International Monetary Fund's latest outlook expecting just 3% global economic growth in 2023, down from 6% in 2021 and 3.4% in 2022. 

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