11 Mar 2009

Terms of trade down again

12:18 pm on 11 March 2009

Terms of trade fell for the third consecutive quarter at the end of last year, as increases in import prices outstripped export price rises.

Terms of trade, which is a measure of what New Zealand can buy with what it sells, fell 0.9% in the fourth quarter.

When price movements are stripped out, import volumes fell 4.8% largely due to a huge drop in vehicle imports, while export volumes fell 1.8% due to a drop in oil production.

Economists warn if the deficit is not brought under control it could lead to New Zealand's credit rating being downgraded.

If this happens banks, Radio New Zealand's economics correspondent says companies and the Government will pay a higher premium to borrow overseas and interest rates will rise.