1 Mar 2012

Terms of trade fall

6:34 pm on 1 March 2012

New Zealand's terms of trade fell further in the final three months of 2011 despite export volumes reaching record levels.

The terms of trade fell 1.4% in the final three months of 2011 compared with a 0.6% fall in the previous quarter, official figures show.

Export prices rose 1.7% but import prices rose more strongly by 3.2% which resulted in the biggest quarterly fall in the terms of trade since 2009.

But Goldman Sachs economist Philip Borkin says despite the fall, terms of trade remain at very high levels.

He says import prices have remained elevated and oil prices remain high, but in world terms the prices for New Zealand's commodities such as dairy have eased off their high levels.

Prices for imported food, petrol, plastics and machinery all rose strongly, and imports were made more expensive by a fall in the value of the dollar.

Despite the decline, the country's terms of trade remain at near a 40-year high.

And a rise in dairy exports pushed up seasonally-adjusted export volumes by 2.9% in the quarter to the highest level since data collection began in 1990.