. the asian region was also affected by concerns circulating about risks in china. it ’ s worth contrasting the experience of these commodity exporters with australia, or with an economy more exposed than australia to oil prices, such as canada. falling commodity prices reduced australia ’ s terms of trade, and thus our income. there was a debate about whether the australian dollar had depreciated by enough to offset that effect. but the net effect of lower commodity prices and the exchange rate was smaller than in some other economies. the lower exchange rate had gone some of the way to cushioning the income effects of the lower terms of trade. it also contributed to helping some parts of the non - mining economy pick up. the 2016 turnaround late last year, the negative sentiment and rhetoric around the global economy started to turn around. clearly there was a recovery in the data, but the recovery in the accompanying rhetoric was even more marked. to the extent that perception affects people ’ s expectations, this had the potential to influence actual outcomes. 2 / 10 bis central bankers'speeches perhaps one way to show this is to look at the text from reports by key economic agencies. if you contrast the words most frequently used in the first chapter of the april 2016 imf world economic outlook, with the same chapter in the issue from a year later, you can see how the tone has changed. 2 another way to characterise this change in tone is that in the april 2016 edition, around 6 per cent of the key words coded as positive and 10 per cent as negative. a year later, more than 13 per cent of the words were considered positive, compared with about 5 per cent negative. at first, the turnaround seemed to be only in ‘ soft ’ indicators of sentiment, such as business surveys and financial market prices. the global purchasing managers indices – a commonly used measure of surveyed business conditions – hit bottom and started to turn around in late 2016 ( graph 3 ). commodity prices also started to lift. over time, however, clearer signals started to emerge that this was more than just people feeling optimistic. there was something real happening as well. growth in global merchandise exports was the next to pick up. soon afterwards, it became clear that growth in industrial production was also increasing ( graph 3 ). it should be noted that throughout this period, the swings in the actual data were never very large, certainly not relative to the crisis period. 3 / 10 bis central bankers'speeches by the time we reached early

to have picked up further recently, neither is this expansion a flash in the pan. that is positive news for the australian economy, too. noticing that change in momentum required economic forecasters to be alert to the right indicators, and have the right framework for thinking about the signals these indicators send. nothing is ever clear - cut. there are always uncertainties about the data. there are times when you have to be willing to make a call, because waiting until you are 100 per cent sure things have changed means waiting too long. and that means taking a view and being willing to evolve that view as new data come in, just as we always have done. thank you for your time. bibliography rba ( 2015 ), ‘ box c : the effects of the fall in oil prices february, pp 46 – 48. ’, statement on monetary policy, rba ( 2017 ), ‘ the recent pick - up in global merchandise trade policy, august, pp 13 – 14. 9 / 10 ’, statement on monetary bis central bankers'speeches rudebusch g ( 2016 ), ‘ will the economic recovery die of old age ’, federal reserve bank of san francisco. 1 a sentence along these lines was included in several of the bank ’ s statements on monetary policy over this period. see also rba ( 2015 ). 2 the colouring of the words as red for negative and blue for positive has been done manually, based on the consensus of a number of colleagues. standard packages for sentiment analysis do not handle the nuanced communications of central banks and international agencies particularly well. it should also be noted that some nouns that are coded as positive ( such as ‘ growth ’ or ‘ investment ’ ) can sometimes be mentioned in negative contexts, for example with verbs such as ‘ slowed ’ or ‘ declined ’. that is certainly the case in the april 2016 issue. the cited proportions of words coded positive or negative does not include common ‘ stop words ’ such as ‘ the ’, ‘ and ’ and ‘ with ’. 10 / 10 bis central bankers'speeches