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Australian Commodity Index Tumbles

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Australian Commodity Index Tumbles

The Reserve Bank of Australia (RBA) has provided an important update to the country’s commodity based economy in the form of the RBA Commodity Index SDR. This key measure of export price changes in the commodity space is showing a contraction of 12.6% year on year for the month of April, this represents a very slight improvement on the March reading of -12.8%.

An indication of the trend in the cost of overall trade for Australia was also made available earlier this morning. The Export Price Index for Q1 rose by 3.6% quarter on quarter, this is a significant pickup over the previous quarters reading of -0.5%, market economists had been anticipating a gain of just 1.5%. On the other side of the trade coin the Import Price Index also rose on the quarter, coming in at 3.2%. This too is a significant turn around on the previous quarter’s figure of -0.6%, the anticipated rise this quarter was just 1.8%.

The fall in Australia’s commodity prices takes the RBA’s price index to it’s lowest level in over four years. Advances in base metals and agricultural commodity prices supported the index in the face of falling iron ore, coal and gold. The RBA compiles it’s prices from market intelligence as opposed to spot prices which in fact rose during the month of April.

In reality prices remained relatively stable in Australian Dollar terms. The real drag on the Commodity Price Index is the fact it is measured in foreign currency terms, the fall from the all time high of mid 2011 is obviously being driven by the fact the Australian Dollar currency index has depreciated by almost 13% over the same time frame.

Australia’s inflation rate is continuing to tick higher, rising to 2.9% last month. This is may accelerate RBA monetary tightening which in turn could spur an increase in the Australian Dollar, this will in time bring the Commodity Index back towards it’s long term average.

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