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Miners Reap Record Profits as Commodity Prices Soar - September 2022 

Company profits in the mining sector soared 14% or $10.2bn in the June quarter, reaping more profits than every other non-financial industry combined. The resources sector posted a record $81bn quarterly profit riding on the back of sky-high commodity prices. Mining company gross profits are 51% higher over the year and 94% above pre-COVID-19 levels with company tax providing a boost to federal and state government budgets. Value of wages and salaries paid to workers increased by 3.3% in the quarter, rising to 6.8% higher over the year. Profits outside the mining sector only rose by 0.8%, to $69.6bn. 

 

Coal prices have soared since Russia's invasion of Ukraine as the world seeks alternative sources of energy. Newcastle coal futures are trading at $US435/tonne, more than doubling since the start of the year. Businesses have switched from 'just-in-time' model to 'just-in-case' model to take into account supply chain disruptions with increases in inventories that are expected to make a large subtraction from GDP growth. However, weakness in inventories is offsetted by strong growth in household consumption due to the unwinding of COVID-related restrictions that weighed on spending in March. Despite the RBA's existing 175 basis points of rate hikes, there is on average a three-month lag between a rate hike and when CBA borrowers on standard variable rate mortgages experience an increase in their loan repayments explaining the lag in official spending data whilst consumer sentiment sits at recession levels.  Annual GDP Growth however has lifted from forecasts, rising from 3.3% to 3.5%.




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