Slumping commodities suggest a sluggish 2009 The slump in oil and other commodity prices is sending a message that global economy will worsen, not improve, in 2009, a message that the Reserve Bank of Australia has been very alert to. It's why the bank has been pushing a message of an easing in monetary policy. The Bank is angling to make a pre-emptive cut in rates (just as it launched pre-emptive rate rises, starting a year ago to tackle inflation) to allow the economy room to adjust to any further downturn in the global economy. The message from the markets isn't one of concern about the impending RBA rate cut. It’s the rush by big global investors to pull back from the world and re-invest in the US because they reckon the potential for losses there will be less than being exposed to other economies, such as Europe, the UK and Australia over the next year or so. In Australia's case the concern is what a extended global slowdown does to our economy and China and India. Hence the RBA's comments yesterday at the end of its economic outlook in the latest Monetary Policy Statement: Any further deterioration in the outlook for global growth would represent a significant downside risk to the domestic activity profile, particularly if it led to a marked slowing in growth in China and India. This could lead to a significant deterioration in the outlook for the Australian economy and commodity markets, which could lead to further moderation in inflation over time as growth of domestic incomes and spending eased and oil prices fell.