It’s now wonder Australia’s economy is doing so well right now.
The nation’s export prices just spiked, in Q2, by the highest amount ever recorded.
Roland Randall @ TD Securities:
The export price index increased 16.1%/qtr in the June quarter, up from 3.8%/qtr for the prior period.
This is the biggest rise on record (since 1974), outpacing the 15.9%/qtr increase recorded in December 2008, the peak of the last terms-of-trade boom.
The year-on-year rate has turned positive, with export prices rising by 7.1%/yr. This will explode in coming quarters as we move into the period where the base effect is GFC affected.
The result was 89% driven, based on TD calculations, by the sharp rebound in metals and coal prices… ie. by China’s continued rebound. Yep, commodities are booming down under, and it might surprise some Americans to know that some, large, parts of the world can grow despite weak U.S. employment and housing.
Helped by the fact that import prices only rose 1.9% over the same period, Australia’s terms of trade are also now soaring, as shown by the chart from Mr. Randall shown above-right. He believes the Australian central bank is likely to hike its key interest rate by 25 basis points (0.25%) at its next meeting on August 3rd.
If true, this would be a bullish sign from Australia, as they’d be continuing their upward interest cycle, after taking a brief pause not too long ago. You can get a sense for the Australian interest rate cycle from the tradingeconomics.com graphic below.