1 Sep 2014

Terms of trade near all time high

5:58 pm on 1 September 2014

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

Official figures show the terms of trade, which measure the amount of imports that can be bought with a given amount of exports, rose 0.3 percent in the three months to June.

New Zealand's terms of trade are near an an all time high.

New Zealand's terms of trade are near an an all time high. Photo: PHOTO NZ

It's now 1.3 percent below its all-time high in the June quarter of 1973.

Statistics New Zealand said the increase is due to export prices falling less than import prices.

Export prices fell 2 percent, due to a rising dollar and a 4 percent decline in dairy and a 6.5 percent decline in log prices.

Seasonally adjusted export volumes fell 5.3 percent, its biggest decline in more than six years, with meat making the largest contribution.

The rising dollar also contributed to import prices falling 2.3 percent, led by lower crude oil prices.

Seasonally adjusted import volumes rose 3.6 percent, led by capital goods.

ASB bank rural economist Nathan Penny, said the increase was due to import prices falling more than export prices.

He said import prices fell by more than expected due to a high New Zealand dollar and inflation around the world being fairly low.

Mr Penny said New Zealand has benefited from lower import prices, but at the same time the country's export prices did not fall as much as expected.

He said the terms of trade should now decline due to plunging dairy prices.