At the same time as export volumes remained weak, import volumes over recent years rose strongly. Imports were boosted by the strong domestic demand, partly reflecting the increase in real income due to the terms of trade rise, and by the accompanying rise in the exchange rate.
This latter factor, combined with the worldwide fall in the prices of manufactured goods, meant that import prices in Australian dollars fell sharply until recently which encouraged import volumes to rise strongly. This is a normal process whereby a floating exchange rate relieves the pressure on domestic supply and inflation, but at some cost to the balance of payments.