Within today’s data dump of partial measures that feed into tomorrow’s national accounts release for December was the important news that Australia’s terms-of-trade has fallen another 1.7% (seasonally adjusted) and 1.9% (trend) over the quarter to be down by 10.6% (seasonally adjusted) and 9.5% (trend) over the year (see below charts).
As you can see, we are fast approaching the GFC low with much further still to fall. And since the terms-of-trade measures the price received for Australia’s exports relative to the price paid for imports, the sharp fall in the terms-of-trade suggests that national disposable income will register another decline in the December quarter, which continues the trend in place since late-2011 (see next chart).
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