Macroeconomic Consequences of Terms of Trade Episodes, Past and Present

Abstract

The early‐twenty first century saw Australia experience its largest and longest terms of trade boom. This paper places the most recent terms of trade boom in its historical context. While similarities exist with previous episodes, the macroeconomic policy frameworks and settings prevailing were quite different to those of the past. These different frameworks and settings mitigated the broader macroeconomic consequences of the terms of trade upswing and may do likewise as it declines.