NZ terms of trade fall 9pc

The rising New Zealand dollar and falling prices for dairy exports were key factors in New Zealand's June quarter terms of trade falling 9 per cent.

Publishing the data today, Statistics New Zealand (SNZ) said the latest decline followed a fall in each of the previous four quarters, with the terms of trade index now at its lowest level since September 2006.

The June quarter fall in the terms of trade was the largest since March 1975.

It was due to export prices - down 11.6 per cent - falling more than import prices - down 2.9 per cent - and meant 9 per cent fewer imports could be funded by a fixed quantity of exports than in the March quarter.

The export price index fell 11.6 per cent in the June quarter, influenced by an 8.7 per cent appreciation in the New Zealand dollar, according to the Reserve Bank's trade weighted index, SNZ said.

The largest contributor was the food and beverages index which fell by 14.8 per cent. That was driven by dairy products prices which were down 24.1 per cent, and meat down 7 per cent.

The June quarter fall in the export price index was the largest since a 40 per cent fall in the June 1951 quarter which was influenced by a large fall in wool prices, SNZ said.

Export prices were now at their lowest level since the September 2007 quarter, SNZ said.

Seasonally adjusted export volumes rose 7 per cent in the June quarter, mainly driven by a 23.7 per cent rise in volumes for dairy products, a 62.7 per cent rise in petroleum and petroleum products, and a 14.6 per cent rise in forestry products.

The import price index fell 2.9 per cent in the June quarter, with chemicals and related products down 7.9 per cent, mechanical machinery down 5.1 per cent, and electrical equipment and apparatus down 4.8 per cent.

Seasonally adjusted import volumes fell 1.9 per cent in the June quarter, the fourth consecutive quarterly fall.

In the latest quarter, an 8.1 per cent fall in intermediate goods made the largest contribution to the overall fall in import volumes.

Offsetting effects came from a 36.3 per cent rise in cars, following two big quarterly falls, and a 41 per cent rise in capital goods.

In the year to June the terms of trade fell 13.1 per cent, following rises of 10.7 per cent and 2.3 per cent in the years to June 2008 and 2007, respectively.

The latest annual fall was the largest since June 1980.

- NZPA