A fall in the terms of trade (TOT) reflects that the Australia is expected to receive for its exports declines, on average, relative to the prices we are expected to pay for . This decline in the TOT should result in a smaller surplus (or higher deficit) in the Balance on Merchandise Trade (BOMT). This is because Australian exporters are expected to receive lower prices for any given volume of exports [and/or importers are expected to pay higher prices for any given volume of imports] which necessarily leads to lower export [and/or higher import values], causing a decrease in export relative to import debits, reducing the value of exports and decreasing the BOMT surplus. The lower TOT will also negatively impact on Australian living standards because the decline in Net Exports (X – M) ultimately results in a lower level of [nominal] GDP and national income. The lower earned in the economy, such as the incomes earned by those with an interest in the tradables sector of the economy (including wages, bonuses and dividends), will further reduce AD and real GDP growth. This will be reflected in a lower rate of growth in real GDP per and a reduced ability of Australians, on average, to access goods and services, therefore impacting negatively on living standards.