An increase in the TWI means that Australia’s rate has increased relative to the weighted exchange rates of Australia’s trading partners. This exchange rate reduces cost inflationary pressures because the AUD price of falls. This reduces the costs of production for producers given that the bulk of Australian imports are either goods [e.g. machinery] or intermediate goods [e.g. fuels]. These lower costs then encourage producers to reduce prices or delay any projected increase in prices that might otherwise have occurred, thereby reducing the rate of inflation emanating from the side of the economy.