RBA commodity index booms

The Reserve Bank of Australia (RBA) has released its index of commodity prices for the month of February, which continues to boom.

The commodity price index rose by 3.6% in February in Special Drawing Rights (SDR) terms – the key determinant of Australia’s terms-of-trade – to be up 19.6% over the quarter and 23.9% year-on-year.

In Australian Dollar terms, the commodity price index rose by 3.1% over the month, 13.6% quarter-on-quarter, and by 12.1% year-on-year.

The RBA’s index of commodity prices shows a strong historical correlation with Australia’s terms-of-trade:

The strong rise over the February quarter, therefore, points to a big lift in Australia’s terms-of-trade in Q1 2021. This, in turn, will bolster national income, nominal GDP, and government finances.

Unconventional Economist
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