1 Mar 2018

NZ terms of trade at new record high

8:33 pm on 1 March 2018

The country's purchasing power with the rest of the world has hit new highs, thanks to record lamb and butter prices.

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Photo: RNZ / Eva Corlett

Official figures show the terms of trade, or the quantity of imports that can be bought with a given quantity of exports, rose by 0.8 percent in the three months to December.

That beat the previous record high set in the September 2017 quarter. Before then, the last high for the terms of trade was the June 1973 quarter.

The December 2017 quarter rise was due to export prices rising faster than import prices.

Export prices rose 4.9 percent and mainly reflected high lamb prices, which rose 12 percent to their highest-ever level.

Dairy prices also surged, with forestry and wool also contributing to the rises.

"Dairy prices have been generally high in 2017, with butter rising 11 percent in the December 2017 quarter to reach a new peak," Stats NZ business prices manager Sarah Williams said.

"Export prices for butter have nearly doubled since September 2016, up 93 percent."

Import prices rose 4 percent, largely due to more expensive crude oil and fuel.

Analysts are picking the terms of trade will remain strong.

"We're adding more value to the products we produce, but also the world is going through a global upswing at the moment and that's reflecting strong demand conditions," ANZ Bank senior economist Philip Borkin said.

Mr Borkin said outside of commodity price moves, inflation globally remains subdued.