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Commodity price index up further in July
Reuters

The Reserve Bank of Australia's index of commodity prices rose further in July, adding to already hefty gains driven by surging prices for coal and iron ore.

The RBA's index increased by 3.0 per cent in special drawing rights (SDR) terms to a record 260.5. In Australian dollar terms it rose by 2.8 per cent to another record of 182.5.

The largest contributors to the rise in July were increases in the prices of coking coal, thermal coal, gold and beef, while the prices of wheat and nickel fell.

The central bank said the inclusion of export price estimates from the Australian Bureau of Statistics for coking coal, thermal coal and iron ore has resulted in an upward revision to the level of the index in April and May, and a downward revision to June.

Since March, the commodity index has risen 25 per cent in SDR terms.

The RBA noted that, while the increase in iron ore contract prices was now incorporated in the index, contract price rises for coking coal and thermal coal were still flowing through to export prices. Coal and iron ore are Australia's two biggest export earners and analysts have estimated that huge price increases agreed for this year could add between $45 billion ($US43 billion) and $55 billion to export earnings in a single year, essentially wiping out the country's trade deficit.

That would also represent a major boost to Australia's income from profits, wages, dividends and tax receipts, helping cushion the economy in the face of higher interest rates and rising living costs.