- New Zealand’s terms of trade fell -1.9% in the December quarter, the combined result of a -1.8% decline in export prices and a +0.2% rise in import prices. The index has now fallen 6.4% from the peak of June 2014.
- Dairy prices led the decline falling -14.8% over the quarter. This was offset by healthy price increases in other key commodity exports such as meat (+12.4%), forestry (+8.4%) and aluminium (+7.8%).
- Prices rose in a number of import categories (mechanical machinery, transport equipment) over the quarter, largely due to the weaker currency. However this was almost entirely offset by a decline of 10.0% in petroleum products.
- Given the decline in dairy prices over the 2014 the terms of trade has remained surprisingly robust, assisted by the strength in prices of other commodity exports and, more recently, the sharp drop in the price of oil.
- Since December oil prices have recovered and dairy prices are also higher, although the latter won’t be captured in the terms of trade until the June quarter. But right now it appears the worst of the decline in the terms of trade is behind us.