There was a bit of activity yesterday to report on. Firstly, the broad measure of business inflation - the producer price index (PPI) - fell by 0.4 per cent in the March quarter - the first fall in 6 years. A 25 per cent fall in the oil price drove the weaker result. Construction costs fell by 1.5 per cent in the March quarter - the biggest fall in records going back over 12 years. Prices of manufacturing goods fell by 8.1 per cent in the March quarter, the biggest fall in 40 years (reflecting lower oil and base metal prices).

Secondly, the RBA Board minutes were released where they acknowledged that " the latest set of indicators suggested that GDP was likely to have fallen again in the March quarter" thereby placing us in a technical recession. They indicated that while near term growth would be soft there was a raft of positive trends including tentative signs of a global economic recovery. Given the significant amount of stimulus in the pipeline they decided to go for just 25bp. The language at the end of the statement seemed to me that they may want to wait and see for the moment and may not ease in May. A lot seems to be happening very quickly however and their tune may change by then.

Link to minutes http://www.rba.gov.au/MonetaryPolicy/RBABoardMinutes/2009/rba_board_min_07042009.html

Thirdly, the Governor of the RBA spoke yesterday and it's been widely reported that he used the 'R' word in relation to Australia in the opening section of his speech. Basically he was alluding to the severity of the global recession and the fact there was no way we could escape it. Our future is dependent on confidence and much of the speech was devoted to instilling this:

"The first thing is to maintain some confidence in ourselves and the prospects for our country over time. We cannot achieve effortless prosperity either on the back of ever‑escalating mineral prices or simply by bidding up the prices of our houses. It is as well to realise that. But as I have said on previous occasions, Australia’s genuine
long‑term economic prospects remain good, and there remain good grounds to think that we will continue to weather the storm better than most.”

Link to the speech: http://www.rba.gov.au/Speeches/2009/sp_gov_210409.html