1 Sep 2016

Dairy prices drag down NZ exports

2:35 pm on 1 September 2016

The country's purchasing power with the rest of the world has fallen because of lower dairy prices.

Dairy Heifers

Dairy Heifers Photo: susan murray rnz

Official figures show the terms of trade - that is, the quantity of imports that can be bought with a given quantity of exports - declined by 2.1 percent in the three months to June, compared with a 4.1 percent rise in the previous quarter.

Export prices declined 1.9 percent, led by a 7.1 percent fall in dairy products.

Statistics New Zealand said overall export prices as well as dairy prices were at their lowest level since the December 2009 quarter.

But volumes surged to their highest level since the series began in 1990 as exporters shipped more dairy products overseas, as well as meat, logs and fruit.

"While the amount of goods New Zealand exported this quarter was at record levels, price falls for key commodities meant the amount that we earned from exports was little changed," Statistics New Zealand international statistics senior manager Jason Attewell said.

"We sent more tonnes of dairy products this quarter than we have in the last four June quarters, but prices for these goods fell."

Total export values rose 7.7 percent to $12 billion in the quarter.

On the import side of the ledger, prices edged up led by higher fuel prices, though Statistics New Zealand pointed out it was still a third lower than in the September quarter last year.

Import volumes hit their highest level since June 1990 with industrial transport equipment jumping 44 percent.

But a senior economist at ANZ Bank, Philip Borkin, said the recent recovery in dairy prices should see a lift in the terms of trade.

"When we look forward from here and we see dairy prices start to recover now and oil struggling to actually push past $50 [US] a barrel, the outlook for terms of trade actually looks reasonable."

ASB Bank rural economist Nathan Penny agreed.

"From here, we expect the Terms of Trade to lift over the next year as dairy export prices recover. However, the export volume surge over the quarter is likely to prove temporary,"

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