Description of Graphs for Speech by I.J. Macfarlane, Governor
‘The World Economy and its Implications for Australia’
14 April 2004
Graph 1: World GDP Growth
The graph has columns showing annual world Gross Domestic Product (GDP) growth from 1978 to 2003 as well as the April Consensus forecast for 2004. It also has a line showing the 30-year average for world GDP growth, which is around 3½ per cent. The graph shows that, after growing at around trend last year, world growth is expected to pick up in 2004 to an above-average rate of around 4½ per cent.
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Graph 2: G7 Policy Interest Rate
This graph shows the Group of Seven Countries (G7) average policy interest rate since 1945. The G7 policy interest rate peaked in the early 1980s at over 14 per cent and has largely been trending downward since then. After a brief tightening period, policy interest rates began to move lower in early 2001 and are now at their lowest level since the Second World War. Currently, the average G7 policy rate is a little over 1 per cent.
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Graph 3: G7 Fiscal Balance
This graph shows the average G7 fiscal balance, as a percentage of GDP, on an annual basis since 1963. The average fiscal balance of G7 countries has been in deficit every year since the start of the series, with the exception of a small surplus in 1969. The graph also shows that the fiscal deficit has increased over the past three years, and is now at least as large as any other time since the early 1960s.
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Graph 4: CRB Index, All Commodities
This graph features a single line, showing the Commodity Research Bureau (CRB) commodity price index for all items, in Special Drawing Right (SDR) terms indexed to equal 100 in 1993/94. The graph shows monthly data from January 1991 to March 2004.
The graph shows that the index has followed several cycles since the start of 1999, but also shows an upward trend. The index has been rising since its latest trough in June 2003. The index has risen by around 14 per cent since June 2003, to reach its highest level since the start of the graph in 1991.
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Graph 5: Baltic Dry Index
The graph has a line showing the Baltic Dry Index on a monthly basis for the period 1985–2004. It shows that, over the past year, the index has increased more than four-fold, and is considerably above previous peaks.
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Graph 6: US S&P 500 and Asian Share Price
This line graph shows two share price indices – the US S&P 500 and an Asian (excluding Japan and China) measure. Both are indexed to 100 in the December quarter 2002. The graph shows that both share price indices have increased over the period. Asian share prices have increased by around 40 per cent and US share prices have increased by over 25 per cent.
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Graph 7: Terms of Trade
The graph features a single line, representing Australia's terms of trade, which is the ratio of export to import prices, indexed to equal 100 in 1993/94. The graph shows quarterly data from the March quarter 1982 to the December quarter 2003.
The graph shows that the terms of trade has followed a strong cyclical pattern from the mid 1980s, though there appears to be a slight upward trend. Since the December quarter 1998, the terms of trade has exhibited a clear upward trend, and has increased by close to 20 per cent over this period. The terms of trade is currently at its highest level in the period shown on the graph.
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Graph 8: RBA Index of Commodity Prices
The graph shows the monthly RBA Index of Commodity Prices in SDR terms, from January 1993 to March 2004. A dot is shown to represent a projection for the index in the middle of the June quarter 2004, based upon expected coal and iron ore prices (using information from recent contract renegotiations), assuming all other prices and exchange rates remain constant.
The graph shows that commodity prices increased over 2000 and 2001, but fluctuated around a flat trend from the middle of 2001 to the middle of 2003. Prices have increased further since the middle of 2003 and the index is now at 110, which is a relatively high level compared with the average of the past decade.
The projection for the June quarter 2004 is 117.7, substantially higher than the current level of the index, indicating that the expected prices for coal and iron ore will take the index to its highest level in the period shown on the graph.
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