Falling oil price boost New Zealand terms of trade

Falling oil prices helped drive up New Zealand's terms of trade, a measure of the purchasing power of exports abroad, in the quarter to the end of March, the government statistics agency said Wednesday.

Prices for goods imports fell 4.3 percent in the March quarter, mainly influenced by oil products, which fell 24 percent, while import prices excluding oil products fell 1.4 percent, according to Statistics New Zealand.

"The drop in import prices this quarter was largely due to falling world prices for crude oil. Import prices are now at their lowest level in nearly 30 years," business prices manager Sarah Williams said in a statement.

"With import prices falling and export prices remaining steady, New Zealand's terms of trade rose 4.4 percent."

The increase means 4.4 percent more goods imports could be funded by a fixed quantity of goods exports than in the December 2015 quarter.

The terms of trade for the March quarter was about the same as the March 2015 quarter, despite rises and falls in both export and import prices during the year.

With the large decrease in the price of oil products, overall goods import prices were at their lowest levels since the September 1988 quarter.

Oil products represent a large proportion by value of New Zealand's imports and petrol prices, as measured by the consumers price index, fell 7.7 percent in the March quarter.

An economic note from the ASB Bank said the terms of trade had passed a cyclical low.

"From the June 2014 peak to the trough last quarter, the terms of trade moved around 10 percent lower, and this quarter's lift means that that is likely to be as low as it gets," it said.

The bank expected the terms of trade "to track sideways" before lifting late this year with an expected recovery in prices for dairy, one of New Zealand's pillar export industries.