The RBA yesterday released its monthly index of Commodity prices. The RBA said, “Preliminary estimates for January indicate that the index declined by 1.5 per cent (on a monthly average basis) in SDR terms, after declining by 1 per cent in December.”
That’s bad news for the economy as it speaks to a reduction in national income which is unwanted at this time of transition out of the mining investment boom.
But SDR’s (Special Drawing Rights) are an artificial currency used by global central bankers and the IMF and while the chart above paints a bleak picture for Australia, the reality is that the Aussie dollar’s fall to 0.8750 is doing its job in insulating the economy from the fall in commodity prices.
Measured in Aussie dollar terms, which after all is what we as a nation earn, the RBA’s commodity index is certainly still off its highs, but has been rising since the Aussie fell.
That’s good news – the lower Aussie dollar is doing its job.