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.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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