Global commodity prices fell 4.3% in January from December, the ANZ Commodity Price Index showed. This was the sixth consecutive month in which the index declined, falling 28% from its peak in July.

In New Zealand dollar terms the index mirrored world price terms, also falling 4.3%. On a trade-weighted basis, the New Zealand dollar was very similar to the levels recorded a month earlier, ANZ said.

This latest news will be seen by the Reserve Bank of New Zealand (RBNZ) as further evidence inflation is coming under control, reinforcing any further cuts in the Official Cash Rate (OCR). The RBNZ has cut the OCR by 475 basis points since July to 3.5%. Economists are expecting the OCR to reach 2% by mid-2009.

Wood pulp and dairy prices led the world price decline, falling 13.1% and 12.3%, respectively, from December. Log prices fell 7.9% and wool prices 6.4%.

"International wood pulp prices have followed the direction set in most other commodity markets. A slump in world-wide demand has seen the price of wood pulp drop to a three-year low. China has bucked the general trend, with demand for wood pulp remaining resilient. This is good news for New Zealand, given that a quarter of our wood pulp exports are sent there," ANZ said.

Meat prices bucked the trend, up 2.1% in world price terms and 0.7% in New Zealand dollar terms from December.