Australia’s commodity prices YoY fell by -1.70% in December 2025, according to the latest release from the Sigmanomics database. This decline is a slight deterioration from November’s -1.30% but remains an improvement compared to the steep drops earlier this year. The commodity price index has rebounded from a trough of -11.90% in February 2025, reflecting easing pressures on Australia’s key export sectors.

Drivers this month

• Iron ore and coal prices softened amid weaker Chinese industrial output.
• Base metals stabilized, supported by supply constraints and infrastructure demand.
• Energy commodities saw mixed performance due to volatile global oil markets.

Policy pulse

The current reading remains below the long-term average decline of -4.80% seen over the past 12 months but above the lows of early 2025. This suggests commodity price pressures are easing but still weigh on inflation and growth expectations. The Reserve Bank of Australia (RBA) is likely to maintain a cautious stance, balancing inflation control with growth support.

Market lens

Immediate reaction: The AUD/USD pair dipped 0.30% following the release, reflecting concerns over export earnings. Meanwhile, 2-year government bond yields edged down 5 basis points, signaling a modest risk-off sentiment in fixed income markets.

Commodity prices are a critical barometer for Australia’s macroeconomic health, given the country’s heavy reliance on resource exports. The YoY decline of 1.70% contrasts with the -11.90% plunge recorded in February 2025 and the -6.10% in May, indicating a gradual recovery trajectory.

Monetary Policy & Financial Conditions

The RBA’s recent tightening cycle has been influenced by inflationary pressures partly driven by commodity price volatility. The moderation in commodity price declines may ease input cost pressures, potentially allowing the central bank to pause rate hikes. However, ongoing global financial tightening and elevated bond yields continue to constrain credit conditions.

Fiscal Policy & Government Budget

Australia’s fiscal outlook remains sensitive to commodity price trends. Lower prices reduce export revenues, impacting government receipts and budget surpluses. The December print suggests some relief from the sharp revenue contractions earlier in 2025 but underscores the need for prudent fiscal management amid external uncertainties.

External Shocks & Geopolitical Risks

Geopolitical tensions in the Indo-Pacific and trade disruptions remain key downside risks. Any escalation could further depress commodity demand, particularly from China, Australia’s largest trading partner. Conversely, easing tensions or new trade agreements could boost commodity prices and export volumes.

Comparing the current print to the previous months, the commodity price index has shown a clear recovery from the mid-year slump of -7.70% in June and -9.00% in August. The November figure of -1.30% suggested a near-stabilization, but December’s slight dip signals ongoing fragility. The data aligns with global commodity price trends, where supply constraints and demand fluctuations have created a mixed outlook.

Market lens

Immediate reaction: Following the release, the Australian dollar weakened modestly, reflecting concerns over export earnings. Commodity-linked equities such as BHP saw a slight pullback, while bond yields softened amid risk-off sentiment.

Looking ahead, commodity prices in Australia face a range of scenarios shaped by global demand, supply dynamics, and geopolitical developments. The baseline forecast anticipates a gradual return to positive growth in commodity prices by mid-2026, supported by infrastructure spending and supply constraints.

Bullish scenario (30% probability)

• Global economic recovery accelerates, boosting demand for metals and energy.
• Geopolitical tensions ease, improving trade flows.
• Supply disruptions persist, supporting higher prices.

Base scenario (50% probability)

• Commodity prices stabilize around current levels with modest upward momentum.
• RBA maintains steady monetary policy to balance inflation and growth.
• Fiscal policy remains cautious but supportive of key sectors.

Bearish scenario (20% probability)

• Global slowdown or recession reduces commodity demand.
• Escalating geopolitical risks disrupt trade and investment.
• Financial tightening pressures commodity-linked sectors.

Structural & Long-Run Trends

Long-term, Australia’s commodity prices are influenced by decarbonization trends, shifting global supply chains, and technological innovation. The transition to green energy may reshape demand for certain minerals, while climate policies could affect production costs and export patterns.

The December 2025 commodity prices YoY data from the Sigmanomics database highlights a cautiously improving outlook for Australia’s resource sector. While the -1.70% decline signals ongoing challenges, the trend away from the severe contractions earlier this year is encouraging. Policymakers must navigate a complex environment of global uncertainty, financial tightening, and structural shifts. Markets will closely watch commodity price trajectories as a key input for inflation, currency valuation, and fiscal health.

Key Markets Likely to React to Commodity Prices YoY

Commodity prices are a major driver of Australia’s economic fortunes and influence several key markets. Resource-heavy stocks, the Australian dollar, and commodity-linked currencies and cryptocurrencies typically respond to shifts in commodity price trends. Below are five tradable symbols with strong historical correlations to Australia’s commodity price movements.

• BHP – A leading mining stock highly sensitive to commodity price fluctuations.
• AUDUSD – The Australian dollar vs. US dollar pair, influenced by export earnings.
• NZDUSD – New Zealand dollar, often moving in tandem with commodity cycles.
• GLMRUSDT – A crypto asset linked to resource tokenization trends.
• CSL – While a biotech stock, CSL’s performance often reflects broader market sentiment tied to commodity-driven economic health.

Extras: Commodity Prices vs. BHP Stock Since 2020

Since 2020, BHP’s stock price has closely tracked Australia’s commodity price index movements. Periods of commodity price strength, such as the rebound in late 2021 and early 2023, corresponded with BHP rallies of 15–20%. Conversely, commodity price slumps in early 2025 led to a 12% correction in BHP shares. This correlation underscores BHP’s sensitivity to global commodity cycles and highlights its role as a bellwether for Australia’s resource sector.

FAQs

What does the Commodity Prices YoY indicator reveal about Australia’s economy?

The indicator measures the year-over-year change in commodity prices, reflecting demand and supply conditions that impact Australia’s export revenues and economic growth.

How does the Commodity Prices YoY affect monetary policy in Australia?

Commodity price trends influence inflation and growth expectations, guiding the Reserve Bank of Australia’s decisions on interest rates and financial conditions.

Why is the Commodity Prices YoY important for investors?

Investors use this indicator to gauge the health of resource sectors, currency movements, and related equities, aiding portfolio allocation and risk management.

Final takeaway: Australia’s commodity prices are stabilizing after severe declines, offering a cautiously optimistic outlook amid persistent global risks and structural shifts.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.

Updated 12/1/25