Falling currency drags down New Zealand terms of trade

The terms of trade for New Zealand's goods exports fell 3.7 percent in the quarter to the end of September as the country's currency dropped in value, the government statistics agency said Tuesday.

Import prices rose more than export prices in the merchandise terms of trade - a measure of the purchasing power of exports abroad, according to Statistics New Zealand.

Prices for imported goods climbed 7.3 percent, the largest increase in seven years, while exported goods prices rose 3.4 percent, with meat prices up 8.1 percent.

"The New Zealand dollar fell 8.4 percent - its largest quarterly fall in nearly seven years," prices senior manager Chris Pike said in a statement.

"This pushed up both import and export prices."

Imported petroleum product prices were up 13 percent, although they were still 25 percent lower than a year earlier.

Excluding petroleum, import prices rose 6.5 percent in the latest quarter.

An economic note from the ASB Bank said the figures would support further interest rate cuts by the Reserve Bank of New Zealand as global inflation pressures remained low.

"The world economy remains weak and spare capacity high, and this outlook, if anything, is continuing to weaken," it said.

It forecast the Reserve Bank would cut a total of 75 basis points from the official cash rate - currently at 2.75 percent - starting this month and continuing in June and August next year. Endit