The Reserve Bank of Australia’s commodity price index continued to slide in November with a decline of 2.9% registered in special drawing rights (SDR) terms.
The decline, led by a steep drop in bulk commodity prices such as iron ore, left the index down 22% from a year earlier. Even with the decline in the Australian dollar, in local currency terms the index fell 11.1% from 12 months earlier, something that reveals commodity price have fallen faster than the currency over the past 12 months.
Taking a longer term view, the declines in SDR, Australian dollar and US dollar terms have been enormous.
In Australian dollar terms, the index now sits at the lowest level since January 2006, with the decline from the index peak of 140.2 struck in October 2008 now standing at 46.1%.
In comparison, the Australian dollar has fallen only 8.7% against the US dollar over the same time period. As the RBA continue to note, the Australian dollar is only “adjusting”, rather than having “adjusted”, to lower commodity prices. On that metric alone, there is a long way for the Aussie to adjust yet.
In SDR and USD terms the declines have been even greater, falling 53.3% and 59% respectively from July 2011, the recent peak for the index in non-Australian dollar terms.
No matter what currency it’s priced in, that’s a substantial fall no matter what way you look at it.
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