The international purchasing power of exports rose in the March quarter, partially offsetting a decline in the volume of goods leaving these shores.
The terms of trade, which is the ratio of export to import prices (or how many DVD players can be bought for a container-load of milk powder),
is now the highest it has been since 1974 and about 10 per cent above its average for the past 10 years.
It was 4.4 per cent up on March last year, which Deutsche Bank chief economist Ulf Schoefisch said was the equivalent of the income generated by the economy expanding 1.3 per cent.
The terms of trade rose 2.2 per cent in the March quarter as export prices rose 0.2 per cent while import prices fell 1.9 per cent.
The rise in export prices was in spite of a higher dollar and was driven by a 7.6 per cent rise in lamb prices.
Forest products clawed back some of their recent declines to rise 1.6 per cent and dairy products were up 0.6 per cent.
The fall in import prices was boosted by an 8.6 per cent decline in oil prices, which is expected to reverse in the current quarter in line with higher world crude prices.
But the rise in export prices was swamped by a 1.9 per cent decline in volumes, so that the value of exports was 1.1 per cent down on the December 2004 quarter.
And a 2.9 per cent increase in the volume of imports - to an all-time record level - meant the imports cost 3.6 per cent more than in the preceding quarter, despite the higher dollar and lower prices.
Consumer goods imports were up 3.4 per cent and imports of plant and machinery up 10.4 per cent, pointing to ongoing strength in business investment.
The volume of imports has climbed steeply over the past three years propelled by strong growth in consumer spending and business investment.
But the Reserve Bank, in Thursday's monetary policy statement, said it expected imports to slow significantly over the next two or three years in line with weaker economic growth and a falling exchange rate.
On the export side, the bank is projecting only modest gains as growth in manufactured goods exports slows from 10 per cent last year to 3 per cent.
