We are digging ever-deeper for a living

By BRIAN FALLOW economics editor

It got slightly harder for New Zealand to earn its living as a trading nation in the September quarter as export prices fell faster than import prices.

The terms of trade fell 0.3 per cent, which means that 0.3 per cent less imports could be funded by a fixed quantity of exports.

The terms of trade have fallen 5 per cent from their peak two years ago.

Export volumes rose 0.9 per cent in the September quarter, driven by a 9 per cent increase in meat exports on the back of a record cattle kill.

Manufactured exports also recovered from their dip in the June quarter, rising 1.7 per cent, the main contributors being dishwashers and gold.

But the forest products sector continued to struggle. Sawn timber and log exports fell 18 per cent.

Dairy exports, which had dropped 11.5 per cent over the previous two quarters, grew 1.8 per cent.

Import volumes rose 1.2 per cent, making a 10 per cent rise for the year ended September, which dwarfed the 0.5 per cent rise in export volumes over the year.

The exchange rate climbed 16 per cent over the same period, making imports cheaper and exports more expensive.

The resulting deterioration in the trade balance, to a deficit of $3.2 billion, will have widened the deficit in the current account of the balance of payments, due to be released next Thursday.

Deutsche Bank forecasts an increase in the current account deficit to $6.2 billion from $5.9 billion in June, equivalent to 4.8 per cent of gross domestic product.