4  viii)  New Zealand’s terms of trade and the real exchange rate have been higher in this cycle  Global commodity prices were on a downward trend from early 2012 and fell sharply after mid-2014. They began to pick up early this year.
New Zealand’s terms of trade began falling in the second half of 2014, but the real effective exchange rate has generally remained high reflecting New Zealand’s higher economic growth and interest rates and the positive investment climate here compared to many other advanced economies. Figure 4 shows the average real effective exchange rate and average terms of trade during the past three domestic expansions.