Terms of trade improve

By BRIAN FALLOW

New Zealand's export dollar stretched a little further in the June quarter.

The terms of trade index, which measures the volume of imports that can be financed by a fixed volume of exports, improved 0.4 per cent as a 1.7 per cent fall in import prices outstripped a 1.4 per cent fall in import prices, Statistics New Zealand reported.

It follows a 1.2 per cent rise in the terms of trade in the March quarter.

While 2 per cent lower than they were a year ago the terms of trade are back around the trend levels that prevailed for several years before they surged over 2001 and 2002.

It was the eighth quarter in a row that export prices have fallen. The drop reflected both lower prices for export commodities, especially methanol, aluminium, wood and meat, combined with a stronger New Zealand dollar.

Dairy prices, however, rose 5.5 per cent, the first increase since September 2001.

The fall in import prices mainly reflected the stronger dollar and falling world oil prices, Statistics New Zealand said.

The data on trade volumes continues the tale of two economies: struggling exports and a buoyant domestic sector sucking in im-ports.

Export volumes fell 3.8 per cent, reversing the gains of the two preceding quarters.

Dairy shipments fell 9.6 per cent, on top of a 4.6 per cent decline in March, while meat volumes fell 5.3 per cent - partly explained by an unseasonably early peak in export lamb season because of dry conditions in some areas.

Import volumes on the other hand rose 4.8 per cent, the strongest quarterly rise for three years.

Car imports were up 24 per cent in the quarter to an all-time high, while consumer durables rose 8.8 per cent.