My previous post emphasised the role of the RBA in securing sound economic outcomes in Australia over the past decade. The RBA today (here) provided a graphical indication of the luck the Australian economy has enjoyed from improvements in its terms-of-trade via improved commodity prices. The attached graph is informative. Apart from the dip after the Asian economic crisis of 1997 prices have moved strongly upwards over the past decade increasing the real earnings of Australians. Moreover, improvements are continuing. Preliminary estimates for February indicate that a rise of 2.1% in SDR terms following an increase of 1.9% in January. The largest contributors to the rise in February were increases in the prices of wheat, sugar, aluminium, and copper. In Australian dollar terms, the Index rose by 2.4% in February following a rise of 1.9 % in January. There will eventually be a dip but retaining flexible exchange rates should insulate the Australian economy from such a shock.