Terms of Trade in the Balance of Payments

Year-to-year trends in terms of trade (%change):

• 2001-2002:
• 106.32-106.85
• 0.50% improvement
• 2002-2003:
• 106.85-102.08
• -4.46% deterioration
• 2003-2004:
• 102.08-108.21
• 6.01% improvement
• 2004-2005:
• 108.21-112.56
• 4.02% improvement
• 2005-2006:
• 112.56-112.09
• -0.418% deterioration
• 2006-2007:
• 112.09-114.03
• 1.73% improvement
• 2007-2008:
• 114.03-125.76
• 10.3% improvement
• 2008-2009:
• 125.76-120.92
• -3.85% deterioration
• 2009-2010:
• 120.92-118.77
• -1.78% deterioration

Year-to-year trends in trade balance (%change):

• 2001-2002:
• no data
• 2002-2003:
• no data
• 2003-2004:
• no data
• 2004-2005:
• no data-(-1.28)
• 2005-2006:
• (-1.28)-(-0.76)
• 40.625% (increase)
• 2006-2007:
• (-0.76)-(-0.26)
• 65.8% (increase)
• 2007-2008:
• (-0.26)-(-0.8)
• -208% (decrease)
• 2008-2009:
• (-0.8)-2.44
• 405% (increase)
• 2009-2010:
• 2.44-3.32
• 36.1% (increase)

Imports/exports of New Zealand

• Imports:
• Demand for New Zealand's imports, I think is inelastic and elastic in some respects. New Zealand imports both inelastic and elastic goods in an even manner, or so it appears.
• Exports:
• I think that New Zealand mostly exports inelastic goods, such as concentrated milk (18% of all exports). Therefore, based on my observations, demand for New Zealand's exports is inelastic.

Does it appear that changes in the TOT affected the trade balance?

• Based on my research, no. For example, even when there was a 10% improvement in the TOT, the trade balance experienced a percentage change of negative 200%. We also see that when there was a 4% deterioration in the TOT, there was a booming percentage change of 405% in the trade balance. According to economic theory, however, they should be related. A deterioration in the TOT should lead to a deterioration in the trade balance. The limit of this economic theory is that it only is true consistently when all other factors are constant. In real life, everything else is not constant usually.