[HSC] Economist: 24 — 30 July 2017
The week in review.

This series of weekly articles aims to compile the important economic news of the week into bite-sized summaries with HSC-specific takeaways.
You can expect a new article every Sunday at 6pm!
This week is all about prices! Lots of changes in the price of produce had some interesting impacts on the Inflation rate for the June quarter. Our (of late) consistently volatile export prices played a part in our Terms of Trade deteriorating, and finally the ‘price’ of wages is going to play a pretty key role in the direction the RBA takes with Interest Rates.
Required Readings
- Inflation fell from 2.1% in the March quarter to 1.9% in the June quarter.
- Australia’s terms of trade deteriorated in the June quarter as a result of falls in commodity prices over that time.
- RBA Governor Dr Phillip Lowe gave a speech this week in which he outlined the current situation of the Australian labour market and its implications upon monetary policy. This speech is summarised in the/my article above!
1. Inflation

The latest inflation figures were released on Wednesday, with the CPI inflation rate falling below the RBA’s target band once again. Consumer prices grew just 0.2% in the June quarter, resulting in a 1.9% annual inflation rate.
The weaker than expected result was a product of price changes in a number of industries. Food prices had been forecast to rise due to Cyclone Debbie constricting supply, however, the rises that occurred in some fruits and vegetables, such as tomatoes and bananas, were offset by falls in other fruits and vegetables, such as oranges and apples.
The clothing and footwear sector saw a noticeable drop off in prices over the last three months, which goes against the long run trend for retail prices in the June quarter and is a worrying sign for Australia’s retail industry.
Underlying inflation, measured through the trimmed mean and weighted median, is also currently below the RBA’s target band and was recorded at 1.8% for the past 12 months.
HSC Relevance
- CPI inflation fell from 2.1% in the March quarter to 1.9% in the June quarter.
- The reduction in inflation was fuelled by a lack of price increases in fruits and vegetables and falling fuel and retail prices.
- The fact that inflation is now below the RBA’s target band in both headline and underlying terms means it is unlikely that the RBA will raise interest rates in the near future.
2. Terms of Trade

Australia’s export prices have been fairly volatile over the last three months. Iron ore is down 14.6% this quarter, whilst coal prices have fallen 7.7%. However, commodity prices have been trending upwards in the last couple of weeks, and if this continues the September quarter results will be much stronger. The fall in commodity prices has been partially offset by rises in the prices of Australian food exports, particularly beef (up 7%) as well as fish and dairy. These improvements are being driven by strong demand from Asia.
Overall, Australia’s export prices fell 5.7% this quarter, whilst import prices only fell by 0.1%. The combination of these results is likely to cause a reduction in the terms of trade by around 5%, from it’s four and a half year high of 109.7 recorded in the March quarter.
HSC Relevance
- Commodity prices have moved downwards for much of the last quarter, however, they have picked up in the last couple of weeks and so too has the Australian dollar.
- The terms of trade is forecast to fall by about 5%, however, that is on the back of a 6.6% improvement in the March quarter.
- The rising AUD is causing concern for Australian exporters as it hampers competitiveness. Innes Wilcox of Australian Industry Group said “almost 90% of business say they can compete in export markets if the Aussie dollar is 80 US cents or less”.
Further Reading
Impress your teacher with the following articles!

