Each of these sets of relative prices has been undergoing quite large changes over recent times, with these changes reflecting the combined effects of high global commodity prices and the associated high level of the exchange rate. In terms of manufactured goods, it has been common worldwide for their prices to fall over time relative to the price of services.
This is the result of faster growth in productivity in manufacturing than in services, as well as globalisation. This long-term trend is clearly evident in the Australian data, but over recent years, as the Australian dollar has appreciated, the decline in the relative retail price of manufactured goods1 – many of which are imported – has been particularly pronounced (Graph 2).