In all this negative news there is one plus that keeps on going: Australian commodity prices:
In Australian dollar terms export prices are virtually unchanged. I prefer looking at world prices though, as it gives you some idea of relative prices without having to look at the terms of trade (a sketchy idea). In this sense prices are down 12% on their September 2008 peak. However, to put this in perspective, this is 20% higher than February 2008!
I am very surprised with how strongly Australian commodity prices have held up. Late last year people told me it was because the RBA measure was a “lagging indicator. However, its February now and the index still looks very strong – why? With this sort of information I can understand why the RBA might not cut rates today.