Australia is in a deep supercycle in commodity prices due to soaring iron ore prices close to record copper prices, rising oil and LNG prices, and higher prices for basic rural commodities.
More and more global media and analysts are talking about a supercycle, but thanks to a sharp rise in iron ore prices and a huge rise in copper this year, it has been picking up steam since the end of 2020, according to the Reserve Bank’s monthly commodity price index.
Since the beginning of the year, the index has risen more than 10% (in Australian dollars).
In April, the overall index hit its highest level since November 2008, when the GFC collapsed following the collapse of Lehman Brothers in September of that year. Commodity prices, primarily oil but also iron ore, skyrocketed and then fell 9, although nowhere near as deep as the drop in oil prices we saw in 2020).
The RBA released its April index on Monday and said early estimates showed an increase of 3.4% in terms of the Australian dollar.
The Australian Bureau of Statistics said last week that its export price index rose 8.6% year-on-year against March due to the disappointing rise in the value of the Australian dollar.
The bank said the sub-indices for rural, non-agricultural and non-ferrous metals rose over the month.
The SIB index for rural areas reached its highest level since July 2012 in April, non-rural goods – the highest level since November 2008, and non-ferrous metals – the highest level since August 2007.
Over the past year, the index has risen 15.4% in Australian dollar terms.
But since April 2020, the Australian dollar has risen by about 20% against the US dollar, completely offsetting the impact of the price spike (which is overwhelmingly priced in US dollars).
In terms of a trade-weighted index (which measures the change in the value of the Aussie against the currencies of our major trading partners, not just the US dollar), the Aussie is up 14% year over March.
Iron ore and copper prices (for example) more than doubled in the year to April.
According to the RBA, the real growth of the index over the past year was more than 40%.