3 Jun 2014

Terms of trade near all-time highs

8:32 pm on 3 June 2014

New Zealand's purchasing power with the rest of the world has edged closer to all-time highs, but analysts say that's as good as it's likely to get.

Official figures show the terms of trade, which measures the amount of imports that can be bought for a given quantity of exports, are just below the all-time high recorded in June 1973.

$100 paper plane


Higher agricultural prices have boosted the economy and the high dollar, which is hurting non-food exporters, is also keeping import prices down.

Export prices rose 0.8 percent, led by increases in dairy, meat and forestry prices. Dairy prices have risen 42 percent since March last year, meat by 6.6 percent, and forestry by 10 percent.

The price of imports fell 1 percent, thanks to a higher dollar, which made goods cheaper.

Seasonally adjusted export volumes rose 1.6 percent led by meat products, which offset a decline in dairy.

The Importers' Institute says import volumes rose 2.3 percent and firms have brought in more plant and machinery, and that was making them more productive.

But analysts say the terms of trade are likely to have peaked, since dairy prices have slumped by more than a fifth recently.

Nevertheless, ongoing strong demand for food from countries like China means the terms of trade will remain relatively high.