Topics

Export receipts and the balance on goods and services

Covers AS91223

Export receipts and import payments

Export receipts are the total money New Zealand earns from selling goods and services overseas.

$\text{export receipts} = \text{price} \times \text{quantity exported}$

Import payments are the total money New Zealand spends buying goods and services from overseas.

$\text{import payments} = \text{price} \times \text{quantity imported}$

On the price taker and two-country models, export receipts are the rectangle whose height is the price and whose width is the export gap.

Why both dimensions matter

Export receipts can change because the price changed, because the quantity changed, or both.
When both move the same way, the answer is unambiguous:
- World price rises → Qs up, Qd down → quantity up and price up → receipts rise.
- World price falls → Qs down, Qd up → quantity down and price down → receipts fall.
When they move opposite ways, you must weigh them:
- New Zealand supply falls and this pushes the trade price up → price up, quantity down. Receipts rise only if the price effect is larger.

The balance on goods and services

This is the concept the standard names, and it is part of the current account.

$\text{balance on goods and services} = \text{export receipts} - \text{import payments}$

Surplus — export receipts exceed import payments. New Zealand earns more from the world than it pays out.
Deficit — import payments exceed export receipts. New Zealand pays out more than it earns, and the gap must be financed by borrowing from overseas or selling assets to overseas owners.

New Zealand has typically run a deficit on the current account, because it imports capital goods and fuel while its exports are concentrated in commodities.

What improves and what worsens the balance

Event	Effect on the balance
World price of an export good rises	Export receipts rise → improves
World price of an export good falls	Export receipts fall → worsens
Better harvest, more exported at unchanged price	Export receipts rise → improves
Strong growth in trading partners	Export volumes rise → improves
Strong growth in New Zealand	Households buy more imports → worsens
NZ$ depreciates	Exports cheaper overseas, imports dearer here → improves
NZ$ appreciates	Exports dearer overseas, imports cheaper here → worsens

The link back to aggregate demand

Net exports $(X - M)$ is one of the four components of aggregate demand:

$AD = C + I + G + (X - M)$

So anything that improves the balance on goods and services also shifts AD right, raising real GDP and employment.
Anything that worsens it shifts AD left.
This is the sentence that connects AS91223 to AS91222 and AS91224, and using it shows the examiner you can move between standards.

Tips and Tricks

"Explained the impact of increased export receipts on the current account" is a Merit bullet in the 2025 report, and "used the graph to calculate the amount of export receipts" is another. Both mean the same thing: treat receipts as a rectangle and say what happened to each side of it.

The single most common error is answering a receipts question with only the quantity. "Exports rose, so export receipts rose" is incomplete if the price also changed — and in most two-country questions it did.

Set out every receipts answer in three steps:

What happened to the price per unit?
What happened to the quantity exported?
Therefore what happened to receipts — and if the two conflict, say which is larger and why.

Be precise with the vocabulary. Exports is a quantity. Export receipts is money. A question asking about the current account is asking about money, so it needs both price and quantity every time.

Finally, remember only the balance on goods and services is in this standard. Do not write about the capital account, foreign investment income or the full balance of payments — they are not in the Explanatory Notes.

Worked ExampleTwo changes, one balance

In one year:

The world price of New Zealand's largest export commodity rises by 12%, and the quantity exported rises slightly.
Strong domestic growth means New Zealand households buy substantially more imported vehicles and electronics.

Explain the effect of each on the balance on goods and services, and on aggregate demand.

Step 1 — The export side

$\text{export receipts} = \text{price} \times \text{quantity}$

The price has risen 12% and the quantity exported has also risen — on the price taker model, a higher Pw draws out more supply (Qs up) and reduces domestic consumption (Qd down), so the export gap widens.

Both dimensions of the rectangle have grown, so export receipts rise clearly.

On its own this improves the balance on goods and services.

Step 2 — The import side

$\text{import payments} = \text{price} \times \text{quantity}$

The quantity of imported vehicles and electronics has risen substantially, because higher New Zealand incomes raise demand for imported consumer durables. Import prices are assumed unchanged.

Import payments rise.

On its own this worsens the balance on goods and services.

Step 3 — The net effect on the balance

$\text{balance} = \text{export receipts} - \text{import payments}$

Both sides have increased, so the direction of the balance depends on which rose by more.

If the rise in export receipts is larger, the balance improves — the deficit narrows or a surplus widens.
If the rise in import payments is larger, the balance worsens.

The 12% price rise applies to New Zealand's largest export commodity, so a 12% gain on a very large base is a substantial dollar amount. Imported vehicles and electronics, while a significant import category, are a smaller share of total import payments. On balance, the improvement is likely to dominate.

Step 4 — The effect on aggregate demand

$AD = C + I + G + (X - M)$

Rising $X$ pushes AD right.
Rising $M$ pushes AD left, because money spent on imports is spending that does not go to New Zealand producers.

If net exports $(X - M)$ rise overall, AD shifts right, raising real GDP, employment and the price level.

$X \uparrow \text{ (price and quantity)}, \; M \uparrow \text{ (quantity)} \Rightarrow \text{net effect depends on relative size}$

Export receipts and the balance on goods and services

Covers AS91223

Export receipts and import payments

Export receipts are the total money New Zealand earns from selling goods and services overseas.

$\text{export receipts} = \text{price} \times \text{quantity exported}$

Import payments are the total money New Zealand spends buying goods and services from overseas.

$\text{import payments} = \text{price} \times \text{quantity imported}$

On the price taker and two-country models, export receipts are the rectangle whose height is the price and whose width is the export gap.

Why both dimensions matter

Export receipts can change because the price changed, because the quantity changed, or both.
When both move the same way, the answer is unambiguous:
- World price rises → Qs up, Qd down → quantity up and price up → receipts rise.
- World price falls → Qs down, Qd up → quantity down and price down → receipts fall.
When they move opposite ways, you must weigh them:
- New Zealand supply falls and this pushes the trade price up → price up, quantity down. Receipts rise only if the price effect is larger.

The balance on goods and services

This is the concept the standard names, and it is part of the current account.

$\text{balance on goods and services} = \text{export receipts} - \text{import payments}$

Surplus — export receipts exceed import payments. New Zealand earns more from the world than it pays out.
Deficit — import payments exceed export receipts. New Zealand pays out more than it earns, and the gap must be financed by borrowing from overseas or selling assets to overseas owners.

New Zealand has typically run a deficit on the current account, because it imports capital goods and fuel while its exports are concentrated in commodities.

What improves and what worsens the balance

Event	Effect on the balance
World price of an export good rises	Export receipts rise → improves
World price of an export good falls	Export receipts fall → worsens
Better harvest, more exported at unchanged price	Export receipts rise → improves
Strong growth in trading partners	Export volumes rise → improves
Strong growth in New Zealand	Households buy more imports → worsens
NZ$ depreciates	Exports cheaper overseas, imports dearer here → improves
NZ$ appreciates	Exports dearer overseas, imports cheaper here → worsens

The link back to aggregate demand

Net exports $(X - M)$ is one of the four components of aggregate demand:

$AD = C + I + G + (X - M)$

So anything that improves the balance on goods and services also shifts AD right, raising real GDP and employment.
Anything that worsens it shifts AD left.
This is the sentence that connects AS91223 to AS91222 and AS91224, and using it shows the examiner you can move between standards.

Tips and Tricks

Set out every receipts answer in three steps:

What happened to the price per unit?
What happened to the quantity exported?
Therefore what happened to receipts — and if the two conflict, say which is larger and why.

Worked ExampleTwo changes, one balance

In one year:

The world price of New Zealand's largest export commodity rises by 12%, and the quantity exported rises slightly.
Strong domestic growth means New Zealand households buy substantially more imported vehicles and electronics.

Explain the effect of each on the balance on goods and services, and on aggregate demand.

Step 1 — The export side

$\text{export receipts} = \text{price} \times \text{quantity}$

Both dimensions of the rectangle have grown, so export receipts rise clearly.

On its own this improves the balance on goods and services.

Step 2 — The import side

$\text{import payments} = \text{price} \times \text{quantity}$

The quantity of imported vehicles and electronics has risen substantially, because higher New Zealand incomes raise demand for imported consumer durables. Import prices are assumed unchanged.

Import payments rise.

On its own this worsens the balance on goods and services.

Step 3 — The net effect on the balance

$\text{balance} = \text{export receipts} - \text{import payments}$

Both sides have increased, so the direction of the balance depends on which rose by more.

If the rise in export receipts is larger, the balance improves — the deficit narrows or a surplus widens.
If the rise in import payments is larger, the balance worsens.

Step 4 — The effect on aggregate demand

$AD = C + I + G + (X - M)$

Rising $X$ pushes AD right.
Rising $M$ pushes AD left, because money spent on imports is spending that does not go to New Zealand producers.

If net exports $(X - M)$ rise overall, AD shifts right, raising real GDP, employment and the price level.

$X \uparrow \text{ (price and quantity)}, \; M \uparrow \text{ (quantity)} \Rightarrow \text{net effect depends on relative size}$