1 Sep 2011

NZ terms of trade high

6:31 pm on 1 September 2011

New Zealand's terms of trade are at their highest for 37 years.

Terms of trade measure what quantity of imports can be bought with its exports.

The increase of 2.3% in the June quarter - the seventh consecutive quarterly increase - shows how much more in imports the country can afford with a fixed quantity of exports.

Statistics New Zealand says it's due to rising export prices and falling import prices.

Export prices rose 1.8%, the third consecutive quarterly increase, driven by higher dairy, meat, wool and petroleum product prices.

Import prices fell 0.5%, driven by lower machinery and transport equipment prices, as well as lower prices for food and beverage imports.

ANZ Bank economist Mark Smith says the high New Zealand dollar is a double-edged sword because it will act to restrain import prices going forward, but the flip side to that is that exports will be hit.

On an annual basis, the terms of trade rose 7.1%.