International commodity prices have surged to another record high.
The ANZ Commodity Price Index increased 3.8 per cent in January, compared with the previous month, with 13 products up, one down and three unchanged.
The price of skim milk powder increased 14 per cent in January, wool prices rose 11
per cent, and whole milk powder and beef both rose 7 per cent.
The kiwi strengthened against all main trading partners during January, dampening the rise in export prices in local currency terms, although the New Zealand dollar index rose 2.3 per cent in January to another record high, ANZ said.
ANZ economist Steve Edwards said the global economy was picking up.
The world price index increased for the fifth consecutive month, hitting 313.3 in January - 27.2 per cent up on last year and 73.9 per cent higher than in January 2009.
"I've had to rescale it [the graph] it used to only go up to 300," Edwards said.
Rising income in Asia was causing increased demand for protein, and a shift from steaks to burger patties was benefiting beef exporters to the US.
"We're assuming prices are going to remain at an elevated level, whether they remain this high is yet to be seen because as soon as some of those prices go up people start to produce more and it comes back down again."
Commodity prices could come back a long way "but at this stage, touch wood, things are looking very promising for the economy as a whole."
ANZ was picking terms of trade to increase, which would rub off on to the rest of the economy, he said.
"At the moment they're [farmers] targeting more paying down their debts rather than spending but sooner or later ... they're going to have surplus funds and will start looking around at spending some of it."
