KEY POINTS:
Import prices outstripped export prices in the June quarter, pulling the terms of trade back from March's 34-year highs.
The terms of trade measure the international purchasing power of a standard basket of New Zealand's exports.
The fall of 0.5 per cent was the first since September 2006 and less than financial markets had expected.
Nearly half of the June quarter's 4.8 per cent rise in import prices reflected an 18 per cent rise in oil prices. World oil prices have peaked and declined since then.
But spot prices for export commodities have fallen too, especially dairy products.
That suggested some of the recent stellar gains in the terms of trade would erode, Goldman Sachs JBWere economist Shamubeel Eaqub said.
"However a reasonable portion of it may stick, supported by positive medium-term supply-demand factors."
ASB economist Jane Turner said that with the terms of trade no longer rising it was providing no additional stimulus to the economy.
"Nonetheless the level of the terms of trade remains high, particularly compared to the last 20 years." That would continue to support an improvement in the trade deficit, she said.
In the June quarter dairy prices eased 0.7 per cent, but that followed three quarters of strong growth and they were still 56 per cent higher than in June last year.
Meat prices, which had seemed to miss out on the agricultural boom, rose 8 per cent in the quarter, to be up 12 per cent for the year.
But if the deterioration on the price front was modest, on the volume front it was a lot worse.
Export volumes fell 3.7 per cent but import volumes rose 5.4 per cent. Some of the rise in imports can be explained by arrival of an oil rig and floating platform, worth nearly half a billion dollars, and aircraft. But imports of consumer goods rose 1.4 per cent too, reversing the March quarter's fall.
