Real growth has slowed since housing prices peaked, but the commodity boom means the world is pumping $40 billion of extra income into Australia a year. That is why the dollar is so strong, BHP Billiton has our biggest profit, resource stocks are near record highs, business investment is leaping, and the federal surplus is strong.
These all have the same cause — excellent commodity prices.
and....
A supercycle is probably under way, but it is in demand rather than price, because the demand most relevant to commodity prices is in the emerging industrial giants of the world. It is they who drive most of the growth in additional industrial production.
That role of emerging giants now rests with China and, to a lesser extent, India.
It is best to take the long view. China and India are reverting to the share of the world economy they had before the industrial revolution.
This may not keep commodity prices high past the next couple of years, but at least higher commodity demand seems set to stay.
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