How Commodity Prices Are Determined.
Commodity prices are driven by a mix of global and local factors. The most powerful force is supply and demand, when demand for materials like iron ore or wheat rises, pices go up. When supply increases or demand falls, prices drop. Other factors include currency movements (especially the Australian dollar), Weather patterns affecting harvests, production costs, and international trade policies. For example, if china increases steel production, iron ore demand may rise sharply, pushing prices higher.
Australia is a major expoter of raw materials, shifts in commodity prices can quickly ripple through the economy, influencing share markets, company profits and government revenue.