2 Mar 2015

Terms of trade fall in December quarter

12:16 pm on 2 March 2015

The country's purchasing power with the rest of the world has fallen for the second successive quarter.

That was due to falling dairy prices, and a lower dollar pushing up import prices.

Official figures showed the terms of trade, which measure the amount of imports that can be bought with a given amount of exports, fell 1.9 percent in the three months to December.

Dairy prices slumped by 15 percent in the quarter to their lowest level since early 2013.

Excluding dairy, export prices rose by 5 percent, thanks to beef prices hitting their highest level since the series began in 1971, while pine log prices rebounded.

Import prices edged up, due in part to a lower dollar making some products more expensive such as diesel, footwear and processed food and drink.

Despite recent declines, senior economist at ANZ Bank Mark Smith said the terms of trade remained high.

"Extremely elevated, that's the key thing. Down definitely since the June 2014 mini-peak, but still around 25, 26 percent above historical averages."

Mr Smith said recent increases in dairy auction prices should result in a rebound in export prices from the middle of this year, though fickle global demand was expected to dampen gains.