3 Sep 2012

Terms of trade continues to slide

10:04 pm on 3 September 2012

New Zealand's terms of trade has fallen for the fourth consecutive quarter.

But the official measure of how much imports the country can buy with its export earnings remains historically high.

Official figures from Statistics New Zealand released on Monday show the country's purchasing power against the rest of the world fell 2.6% for the June quarter compared with a 2.3% fall in the previous quarter.

The biggest fall in the terms of trade since the depths of the global financial crisis resulted from falling export prices and higher import costs.

Statistics New Zealand says export prices fell 1% in the June quarter, compared with a 4% drop in the preceding three months.

Dairy products and wool were the biggest losers, falling 2.6% and 6% respectively.

Prices for dairy have now fallen for four quarters in a row and are at their lowest level since late 2009.

A 1.7% increase in import prices further eroded the country's purchasing power.

The terms of trade, which rebounded quickly and strongly after the financial crisis, remains at a 34-year high despite the recent falls.