Strong and Stable Terms of Trade Defying history, Australia's terms of trade - the prices Australia receives for its exports relative to the prices paid for imports - has improved during the recent world slowdown. This has helped to increase real incomes in Australia and reduce inflationary pressures. Over recent years, the terms of trade has become more stable.
the terms of trade has historically been highly unstable and declining		Australia faced highly unstable and declining terms of trade through its history, driven by swings in world economic activity and declining commodity prices. The terms of trade, real income and inflation tended to move together.
but with greater stability and relative strength in recent years		In recent years, Australia's terms of trade has been more stable and relatively robust. Since 1999, the terms of trade has increased despite the world economic downturn. This helped the Australian economy stay strong in 2001. In addition, rising terms of trade now tend to reduce rather than increase inflation.
because of internationalisation, diversification of exports and falls in import prices		This dramatic change in terms of trade movements stems from greater internationalisation of the economy, increasing diversification of exports and significant falls in import prices, especially information and communications technology goods.
the terms of trade should remain more stable than in earlier decades and relatively strong		These favourable developments in the terms of trade can be credited to a more dynamic and competitive private sector. This follows substantial and continued microeconomic reform in an environment of sound macroeconomic policy. While the future path of the terms of trade remains uncertain, it is likely to be more stable and stronger than otherwise.
Terms of Trade