New Zealand paid 79 percent more for each unit of imported petroleum product in the June quarter than it did three months earlier. It bought 9 percent less of the stuff, and still spent 63 percent more on it. That one line, buried in the overseas trade indexes released by Stats NZ on Thursday, explains most of what went wrong with the country’s trading position over winter.
The headline number is the merchandise terms of trade, which fell 9.0 percent in the June quarter compared with the March quarter. The terms of trade is a simple idea dressed in awkward language. It measures what a boatload of exports buys in imports. When it rises, the country is getting more for what it sells. When it falls, the same butter, lamb and logs buy less fuel, machinery and medicine than they did before.
Export prices rose 3.5 percent over the quarter. Import prices rose 14 percent. The gap between those two figures is the whole story. Petroleum and petroleum products did nearly all of the damage on the import side, with prices up 79 percent in a single quarter as the conflict in the Middle East and disruption around the Strait of Hormuz worked their way through to the cargoes actually landing here.
Falls of that size are unusual. Stats NZ has published a quarterly terms of trade index back to 1957, and on that record a drop of 9 percent or more in a single quarter had happened only four times before 2020. Three of them were in the oil shocks of 1974 and 1975. The fourth was the June 2009 quarter, at the bottom of the global financial crisis. Buyers did what buyers do when the price goes up, and imported 2.1 percent less by volume across the board, but the bill still rose 7.1 percent.
The wider trade accounts, published in the same release, show the same squeeze from a different angle. Total two-way trade in goods and services for the June 2026 quarter came to $64.9 billion, up 16 percent on the same quarter a year earlier. Exports were $32.5 billion, up 14 percent from $28.5 billion. Imports were $32.4 billion, up 18 percent from $27.5 billion. Goods imports alone were up 23 percent year on year, which is a striking figure given import volumes over the quarter actually fell. New Zealand is not buying more. It is paying more.
What makes the quarter genuinely awkward, rather than simply grim, is that the export side of the ledger is in good shape. Dairy export prices rose 3.3 percent over the quarter and volumes rose 3.9 percent. Meat prices rose 4.5 percent and meat volumes rose 10 percent. Overall goods export volumes were up 6.4 percent. Farmers and processors sent more out the door and got a better price for it. In an ordinary year that combination would be the making of a very good story about rural New Zealand.
Services did well too. Total services exports rose $1.1 billion on the year to $8.2 billion, and travel services, which is mostly what visitors spend while they are here, rose $614 million to $3.9 billion. Transportation services were up $168 million to $1.1 billion and telecommunication services were up $93 million to $519 million. Services imports rose more slowly, up $482 million to $9.0 billion, with the biggest movement in other business services, up $304 million to $1.9 billion.
Put the two halves together and the country is running close to flat overall, with a small goods surplus offset by a services deficit. That is a much weaker position than the export performance on its own would suggest, and the reason is the fuel bill. New Zealand has refined nothing domestically since Marsden Point stopped processing crude in 2022 and became an import terminal. Every litre of petrol, diesel and jet fuel now arrives as finished product at whatever the international market is charging that week, which means a price shock offshore lands here quickly and in full.
The consequences have already turned up in monetary policy. The Reserve Bank lifted the official cash rate by 25 basis points to 2.75 percent on 2 September, its second rise in a row. In its statement the Monetary Policy Committee said that “inflation increased to 4.1 percent in the June quarter because of higher fuel prices arising from the conflict in the Middle East”, and that “gradually removing monetary stimulus is appropriate to return inflation to the 2 percent target mid-point while supporting growth and employment”. The trade figures released this week are the raw material behind that sentence. Households are feeling it as higher prices at the pump and, since the decision, higher floating mortgage rates.
The Reserve Bank also noted the split running through the economy. Export-exposed sectors and regional New Zealand are being carried along by strong prices and resilient demand from trading partners, while “weak income growth, job insecurity, and flat house prices continue to weigh on household spending and residential investment, particularly in Auckland and Wellington”. The June quarter trade data is a fairly exact picture of that division. The parts of the country that sell things overseas had a good three months. The parts that buy imported fuel, which is everyone, paid for it.
Whether this is the low point depends almost entirely on oil, which is not something New Zealand has any influence over. A terms of trade fall driven by a single import category can reverse as quickly as it arrived if the price comes back down, and unlike a fall driven by collapsing export prices it leaves the productive base intact. The dairy and meat numbers in this release are the useful signal there. The fuel numbers are the weather. Quarterly and monthly measures also lag what is happening at the pump, as they did in August when diesel was climbing again while the official figures still showed it falling.
You can follow what is happening at the pump week by week in our fuel prices tracker, check import volumes, stock cover and refined product flows in the New Zealand fuel situation tool, and see where the official cash rate sits against its own history on the OCR tracker. We covered the first signs of this in July, when the monthly goods trade surplus all but vanished as fuel imports doubled.
Have higher fuel costs changed how you drive, or what your business charges? Tell us in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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