The lift in the terms of trade in the December 2016 quarter was the largest quarterly increase since the September 2013 quarter, when the terms of trade for goods rose 7.5 percent.
“The uptick of dairy export prices lifted New Zealand’s terms of trade,” business prices manager Sarah Williams said today. “However, dairy export prices are still about a third lower than they were three years ago.”
Terms of trade is a measure of the purchasing power of New Zealand’s exports abroad. A 5.7 percent rise in the December quarter means New Zealand can buy 5.7 percent more imports for the same amount of exports.
While dairy export prices (up 14 percent) and values (up 9.8 percent) rose in the December 2016 quarter, dairy export volumes were down 8.1 percent. Despite the fall in volumes, New Zealand has earned more from the sale of dairy products abroad compared with the September 2016 quarter.
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Import prices fell 0.8 percent, largely due to mobile phones and personal computers.
“Ongoing improvements in technology have meant that imports are better value for money,” Sarah Williams said.
Better quality goods and services are reflected as price falls. These price falls can be seen in the prices households pay for telecommunication and computing equipment, as measured by the consumers price index. The latest consumers price index shows that telecommunication equipment fell 89 percent and computing equipment fell 68 percent over the last 10 years.