By JIM EAGLES
The continuing rise in the value of the New Zealand dollar has again more than wiped out gains from improvements in world commodity prices.
The latest ANZ Commodity Price Index, issued today, shows that world prices rose 0.9 per cent in February to be 4.5 per cent above the level a year earlier.
But in New Zealand dollar terms the index fell 1.5 per cent and is now 17.9 per cent lower than 12 months ago.
Worst affected is the dairy industry, which suffered a further 1.2 per cent drop in New Zealand dollar terms.
ANZ chief economist David Drage said that at least most exporters had the "fairly cold comfort" of knowing prices were around the norm of the past 15 years.
"But it is even colder comfort to the dairy industry, where conditions are much less favourable," he said.
"In New Zealand dollar terms dairy prices are now not far off the lows of the 80s and 90s."
Drage said the tragedy of the situation was that commodity prices across a broad range of products were very strong.
They were only 6.6 per cent off the peak reached in May 2001.
For international dairy prices, for instance, tight supplies had resulted in an increase of 1.3 per cent and prices were now 38 per cent above the low reached last July.
Prices for skins, aluminium, seafood and lamb also showed continued improvements last month.
"If we can have a period of stability or retrenchment in the currency, there will be a chance for the good world prices to shine through," he said
As it was, Drage said, the New Zealand dollar index was now 28 per cent below the peak.
While ANZ expected any future currency gains to be more modest, it was even more difficult than usual to forecast what would happen, so exporters could not be confident of any relief.
In the meantime, the impact of the strong dollar could be delayed for a time through marketing and hedging arrangements.
But Drage said that if present dollar levels were sustained "the effects will inevitably be felt through the economy".
Strong dollar wipes out gains
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