Factors affecting export volumes in New Zealand
Here is a useful graphic from the Reserve Bank of New Zealand showing the factors affecting export volumes.
The exchange rate influences both the supply of and demand for export volumes. However, as many of New Zealand’s exports are priced in foreign currencies, changes in the New Zealand dollar exchange rate do not automatically affect the demand for our exports. Also, some firms may have the ability to charge ‘different’ prices to the norm. This is usually associated with the degree to which a product is differentiated from other products. For example, exporters serving niche markets may be able keep their prices in New Zealand dollars relatively constant, despite a rise in the exchange rate, and face little change in demand. In contrast, dairy products and most
agricultural commodities are comparatively undifferentiated and their prices are determined in world markets.
The demand for New Zealand’s exports is governed by the market size for our products (influenced by foreign income and population growth) and how well we can compete in
world markets. Foreign demand is also a major determinant of the overseas price for most of New Zealand’s exports, such as agricultural produce and commodity manufactures.
Changes to international supply conditions and consumer preferences also have an influence on the world price of our exports.