Best terms of trade for NZ since the UK joined the EEC

June 4th, 2014 at 7:00 am by David Farrar

Stats NZ reports:

In the March 2014 quarter, the merchandise terms of trade rose 1.8 percent, Statistics New Zealand said today. The latest increase was due to export prices rising and import prices falling.

Terms of trade is a measure of the purchasing power of New Zealand’s abroad. An increase means New Zealand can buy more imports for the same amount of .

“Five consecutive quarterly rises have lifted the terms of trade to its highest level since the September 1973 quarter,” prices manager Chris Pike said. The terms of trade is now 1.7 percent below its all-time high in the June 1973 quarter.

How can this be? The opposition claim we must undermine the independence of the Reserve Bank and get them to bring the exchange rate down.

Obviously the country is in crisis, and needs a Labour/Green/Winston/Hone/Laila/Dotcom Government!

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32 Responses to “Best terms of trade for NZ since the UK joined the EEC”

  1. slightlyrighty (2,475 comments) says:

    The truly disturbing thing is, the MSM will not trumpet these figures in the same way that they trumpet the spin coming from the left.

    We have heard much through the MSM about the Manufacturing Crisis, Export Crisis, Monetary Policy Crisis, and the inherent possible flow on effects on our economic recovery and ongoing performance, but when we see figures like this above, and manufacturing in growth, Export receipts at record highs and positive balance of trade figures, or any other indicators of the positive flow on effects of the economic stewardship of the past 6 years, there is scarcely a peep.

    This is newsworthy, and the fact that it is not as well reported as the Left Wing version of the state of the nation should be news in itself.

    Labour, The Greens et all are carrying on like Private Fraser from Dad’s Army, with a constant chorus of “We’re Doomed!” The reality is, as shown above, very different.

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  2. redqueen (562 comments) says:

    I’m sure we’ll get some more ‘doom and gloom’ from the MSM soon enough. Let’s put this into perspective:

    1) Terms of trade high [Tick]
    2) Less New Zealanders leaving [Tick]
    3) More New Zealanders coming home [Tick]
    4) Current account deficit below Treasury forecasts [Tick]
    5) Interest rates remain low with a much lower projected yield this boom [Tick]

    = PANIC!!!

    Seriously, you’d think they want a government made up of some of Looney Toons…

    However, to be fair, the Herald’s editorial this morning against the carbon tax was at least ‘brave’.

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  3. OneTrack (3,089 comments) says:

    “Seriously, you’d think they want a government made up of some of Looney Toons…”

    They want to help to get their mates in.

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  4. Left Right and Centre (2,975 comments) says:

    If the left want to see an actual crisis . . . any reflective surface will do it.

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  5. SPC (5,619 comments) says:

    The terms of trade situation has nothing to do with who is in government or government policy.

    But the dollar value will impact on the profitability of New Zealand business and industry. Not all of whom are advantaged by the current terms of trade. In Oz for example some states were booming because of mining yet other states were in recession.

    Domestic policy does impact on local interest rates and the OCR and thus is an area where policy can be beneficial to business profitability and employment.

    A good terms of trade situation is no reason not to be proactive in domestic policy.

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  6. igm (1,413 comments) says:

    SPC: Terms of trade are an indication of commercial operators having confidence in the administration. If we have another socialist government we will go backwards at 100 kmh. There are so many who have contingencies in place to pull the pin if socialist lunatics are elected, you will see our economy in the doldrums within weeks, not months, as businesses relocate, close, and retrench. Money will go offshore at rates never seen before, and overseas investors will shy away like spooked horses. I assume SPC is another public servant spreading the word of his PSA masters, like this dork Mikenwimp who spouts similar diatribe. When commercial operators have no confidence in government they will go elsewhere, and in many cases, never return.

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  7. EAD (1,072 comments) says:

    I’ll give you 2 examples of hubris:

    “Stock prices have reached what looks like a permanently high plateau” – Irving Fischer, October 21st 1929

    “Best terms of trade for NZ since the UK joined the EEC” – DPF, June 4th 2014

    Perhaps the cause of these terms of trade has something to do with the largest credit bubble the world has ever seen being blown in China (nothing to do with our Government) which is getting set for an epic bust (why do you think all the Chicom money is fleeing to the West)??

    http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100027199/chinese-anatomy-of-a-property-boom-on-its-last-legs/

    http://www.zerohedge.com/news/2013-11-25/chart-day-how-chinas-stunning-15-trillion-new-liquidity-blew-bernankes-qe-out-water

    With these brilliant terms of trade over the past 6 years the great John Key and his Government must have used this opportunity to pay down debt and put us on a sustainable economic path?

    Spending money you haven’t got on things you can’t afford is great……….until it is not and you end up like Greece.

    Vote Conservative/Act – it’s our only chance for some sanity in this insane world.

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  8. mikenmild (11,247 comments) says:

    What? The Herald editorialised against the carbon tax? But what about all the commenters here who assure us the Herald is ‘left wing’?

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  9. SPC (5,619 comments) says:

    igm and others, do you know what terms of trade means?

    Government policy does not determine world market prices for our exports and imports.

    Terms of trade – the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices.

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  10. OneTrack (3,089 comments) says:

    SPC – what igm said. If the coalition of envy gets in, our terms of trade will rapidly turn south.

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  11. SPC (5,619 comments) says:

    mikenmild, it must be left wing because Hosking supports the carbon tax over the ETS.

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  12. SPC (5,619 comments) says:

    One Track, how does what happens domestically here impact on the world market price of our exports or imports?

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  13. redqueen (562 comments) says:

    @Mikenmild

    So they’re Labour supporters, not Green supporters…but in the end, they’re still in favour of government intervention and creating pseudo-markets. That doesn’t sound anything but left wing to me.

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  14. OneTrack (3,089 comments) says:

    SPC – exchange rate for a start

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  15. mikenmild (11,247 comments) says:

    ‘in favour of government intervention and creating pseudo-markets’
    Sounds like National supporters to me.

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  16. FeralScrote (217 comments) says:

    mikenmild
    Even a stopped clock is right twice a day,only Norman has just realised he can`t print carbon credits as easily as he can print cash.
    Bryce Edwards,Norman and Turei should get a room ,yesterdays fawning from Edwards was the most pathetic I`ve read in a long time.

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  17. OneTrack (3,089 comments) says:

    Mike – you can tell that a lefty policy is rubbish when even the herald doesn’t like it.

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  18. SPC (5,619 comments) says:

    I guess the host does not underestimate either the economic ignorance of readers, or their willingness to feign, it in election year so they can applaud the partisan spin he puts up.

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  19. SPC (5,619 comments) says:

    One Track, no – as the exchange rate change is neutral – we both import and export.

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  20. redqueen (562 comments) says:

    @ SPC

    If you bugger up the exchange rate, particularly by printing money (as the Greens advocate), then you’ll affect the terms of trade through the exchange rate. Equally, with a carbon tax you’ll potentially offshore our existing manufacturing base and reduce dairy output, which would potentially reduce our terms of trade through shifting us away from higher value exports. Finally, the current account will suffer as you’ll end up reducing exports and increasing the price of imports.

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  21. SPC (5,619 comments) says:

    red queen, no. The terms of trade refers to the world price of our imports and exports – exchange rate change does not change the terms of trade.

    One you extend the debate beyond to issues such as cost competiveness and domestic incentive, you are no longer discussing terms of trade.

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  22. redqueen (562 comments) says:

    @SPC

    Then how do you determine ‘price’, compared with a basket of goods and services denominated in multiple currencies? If we’re using NZD, then the terms of trade will be directly impacted by the nominal prices involved.

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  23. JC (955 comments) says:

    “it must be left wing because Hosking supports the carbon tax over the ETS.”

    As sensible people should *provided* there genuinely is a problem with CO2 which to date has been an almost unqualified boon to mankind and the Globe.

    Even the Greens recognise there’s no problem with CO2 because they “flew” Bubblehead Lucy free down to their conference to say whatever it is the Greens are doing its gotta be good.

    Then for further proof there’s no CO2 problem they intend to take the near billion dollars raised by the tax to redistribute aka bribe to other non farming groups instead of putting the money into a fund to reduce CO2.

    With those two moves they gave away any serious notions of CO2 being a problem and went for a straight redistribution of money from a hated (by them) group to others who might vote for them.. its the classic policy of envy, isolation, bribery and corruption to set one group against an unfavoured one.

    JC

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  24. All_on_Red (1,581 comments) says:

    Wake up people. The Carbon (dioxide) Tax is a tax on energy used by industry. It’s going to raise costs and kill jobs.
    Enjoy the good trading times while you can.

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  25. SPC (5,619 comments) says:

    red queen, changes of our currency are of no import in the terms of trade improving or declining. Its the world price of imports and exports (some influence from offshore currency variability).

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  26. srylands (410 comments) says:

    Umm SPC is correct. The terms of trade is independent of the exchange rate.

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  27. SPC (5,619 comments) says:

    JC, a carbon tax is an impost on using a scarce resource. It makes alternatives more cost competitive and thus increases uptake. It ensures that replacement supply is there and being phased in before the carbon resource is used up. It ensures a secure transition.

    I suspect some are uncertain about GW, (there is a range of factors and they are not all upside), but accept that the market needs this planning.

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  28. redqueen (562 comments) says:

    @Srylands & SPC

    Then, again, how do you measure ‘price’? I may be missing something here, but if the price of milk goes up abroad, but is matched by an exchange rate movement, then our export price effectively remains constant (in real terms to us). Equally, when petrol prices go up abroad, but the NZD continues to rise, we don’t see such a real movement in NZ. Saying there is some ‘offshore currency variability’ sounds a bit nebulous…

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  29. SPC (5,619 comments) says:

    red queen, as we both import AND export, our currency change is neutral. Thus terms of trade is only moved by externality. It is simplest to see as world market price – but there are different markets (and thus foreign currency is a contributing factor in measurement).

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  30. wreck1080 (3,906 comments) says:

    The, why is Graham Wheeler worried about the exchange rate?

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  31. SPC (5,619 comments) says:

    Obviously the kiwiblog host is a student of Muldoon’s wisdom, the public would not know what “current account/Balance of payments/terms of trade” was/meant.

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  32. SPC (5,619 comments) says:

    wreck1080, two reasons – competitiveness of our productive economy and inflation. Not necessarily at the same time

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