The Australian dollar is continuing to gain in strength along with a rise in the price of commodities that the nation exports. Last week, the Australian dollar gained for a seventh straight day in tandem with the UBS Bloomberg Constant Maturity Commodity Index, which also climbed to a record high.
Meanwhile, a forecast issued by the Australian Bureau of Agricultural Resources Economics (ABARE) says that Australian commodity exports are tipped to surge 40 per cent during the coming financial year, led by massive growth in the minerals and energy sectors.
It said that indicators are also good for agriculture, with a 65 per cent increase in winter crop production forecast for 2008-09. Farm sector exports are predicted to rise 12 per cent to about $30 billion. The forecast, however, is dependant on good rainfall.
Commodity exports are predicted to fetch a record $212 billion in the next financial year, 2008-09. Of this figure, $178 billion is expected to materialise from the minerals and energy sector - up from $120 billion in 2007-08.
Prices for coking and thermal coals, iron ore and crude oil have all risen to record highs this year, compelling Australia's central bank to raise interest rates twice since January to curb inflation. Market analysts expect the overnight cash rate target to go up by 34 basis points over the next 12 months.
According to ABARE, the Australian dollar may further extend this quarter's 4.6 per cent gain against the US dollar on the back of rising commodity exports.
It said high prices are expected to materialise because production growth for minerals and energy remained modest, even as world demand remained high. The mismatch would ensure an increase in prices, particularly for iron ore, coal, crude oil, gold and aluminium, it said.