Transcript Slide 1

An Economic and Business
Outlook
Presented by Dr Chris Caton
October 2011
US Housing starts are bumping along the bottom
(Millions)
2.4
Permits
Starts
2
1.6
1.2
0.8
0.4
96
97
Source: Datastream
2
98
99
00
01
02
03
04
05
06
07
08
09
10
11
Government debt (% of GDP)
3
2011 Growth Forecasts (%)
Month of Forecast
J-11
F-11
M-11
A-11
M-11
J-11
J-11
A-11
S-11
Australia
3.1
2.9
2.9
2.7
2.7
2.0
1.9
1.7
1.8
New
Zealand
2.9
2.7
1.1
1.1
1.2
1.2
1.4
2.1
2.1
US
3.2
3.2
3.1
2.9
2.7
2.5
2.5
1.8
1.6
Japan
1.2
1.5
1.4
0.3
0.0
-0.7
-0.7
-0.7
-0.5
China
9.2
9.3
9.4
9.3
9.3
9.2
9.2
9.2
9.1
Germany
2.5
2.5
2.6
2.7
2.8
3.3
3.4
3.4
2.9
UK
2.1
1.9
1.9
1.8
1.6
1.6
1.5
1.3
1.2
“World”
3.4
3.5
3.5
3.3
3.2
3.2
3.2
3.1
3.0
Source: Consensus Economics
4
2012 Growth Forecasts (%)
Month of Forecast
J-11
F-11
M-11
A-11
M-11
J-11
J-11
A-11
S-11
Australia
3.5
3.7
3.7
3.8
3.8
4.0
4.0
3.8
3.7
New
Zealand
2.9
3.1
3.8
3.9
3.9
3.9
3.9
3.9
3.7
US
3.3
3.3
3.3
3.3
3.2
3.1
3.0
2.4
2.1
Japan
2.0
2.0
2.1
2.7
2.8
3.2
3.1
3.1
2.4
China
8.9
8.9
9.0
8.9
8.9
8.8
8.8
8.8
8.6
Germany
1.8
1.8
1.9
1.9
1.9
2.0
1.9
1.9
1.3
UK
2.1
2.2
2.1
2.2
2.2
2.1
2.2
2.0
1.8
“World”
3.6
3.6
3.6
3.7
3.6
3.6
3.6
3.5
3.2
Source: Consensus Economics
5
Real GDP growth in Australia and the US
Year to % change
10.0
US
Australia
7.5
5.0
2.5
0.0
-2.5
-5.0
80
Source: Datastream
6
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
It’s the developing world, stupid
7
What goes up...
8
The Labour market has done well but employment
growth has slowed dramatically
000’s
%
12000
12.0
11400
11.0
Employment (LHS)
10800
10.0
10200
9.0
9600
8.0
9000
7.0
8400
6.0
7800
5.0
Unemployment Rate (RHS)
7200
4.0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Source: ABS
9
Retail spending has slowed
10
And here’s one reason..household saving has risen
11
Australian Inflation
%
9
Headline CPI
8
Underlying inflation
BT
Forecasts
7
GST
Effect
6
5
4
3
2
1
0
-1
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: ABS
12
Interest rate changes do make a difference!
13
House Prices - Australia v Melbourne
650
Index (1987 = 100)
Melbourne
Australia
600
550
500
450
400
350
300
250
200
150
100
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Source: ABS
House Prices - Australia v Brisbane
700
Index (1987 = 100)
Brisbane
650
Australia
600
550
500
450
400
350
300
250
200
150
100
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Source: ABS
Prices have fallen everywhere
16
Gross Domestic Product
%
8
Qtly growth
7
Year-to growth
Non-farm year-to growth
BT
Forecasts
6
5
4
GST
Effect
3
2
1
0
-1
-2
-3
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Source: ABS
17
Coal exports are recovering but still have a way to go
18
Mining investment (share of GDP)
19
Global Medium-Term Economic Growth and
Inflation Prospects (2011-2021)
Australia
Norway
United States
New Zealand
Canada
Sweden
United Kingdom
Spain
Switzerland
Netherlands
Germany
France
Eurozone
Japan
Italy
20
Source: Consensus Economics
GDP
Inflation
3.2
2.9
2.8
2.8
2.5
2.4
2.2
2.1
2.0
1.8
1.7
1.7
1.6
1.3
1.1
2.7
2.3
2.2
2.6
2.1
2.1
2.6
2.1
1.4
1.6
1.8
2.0
2.1
0.9
2.0
Asia-Pacific Medium-Term Economic Growth and
Inflation Prospects (2011-2021)
GDP
Consumer Prices
India
8.5
6.1
China
7.8
3.5
Indonesia
6.2
5.5
Malaysia
5.1
3.1
Philippines
5.0
4.7
Thailand
4.8
3.4
Singapore
4.6
2.8
Taiwan
4.4
2.3
South Korea
4.0
3.1
Hong Kong
3.8
3.3
Australia
3.2
2.7
New Zealand
2.8
2.6
Japan
1.3
0.9
Source: Consensus Economics
21
Financial Market Forecasts
Now
(4 Oct)
End-Dec
2011
End-June
2012
0.952
0.91
0.88
Official cash rate (%)
4.75
4.50
4.50
10 Year Bond yield (%)
4.09
4.40
4.80
ASX 200
3872
4250
4750
AUD/USD
22
The Australian Dollar and US Trade Weighted
Index
Index
AUD/USD
180
1.12
AUD/USD (RHS)
161
1.00
142
0.88
122
0.76
US TWI inverted (LHS)
103
0.64
84
0.52
64
0.40
99
00
Source: Datastream
23
01
02
03
04
05
06
07
08
09
10
11
Australian Sharemarket Performance – ASX200
7000
6500
6000
5500
5000
4500
4000
3500
3000
2500
2000
1500
1000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Source: Bloomberg
24
Shares are cheap here and elsewhere
25
All sectors are looking cheap
Major Sector PE Ratios on 12 Month Forward Consensus Earnings
24
Resources
X
Banks
Industrials
ex banks
Market
X
03-07 Average
20
20
15.9
16
16
14.8
13.3
12.7
12
12
11.2
10.0
8
10.2
9.0
8
4
4
05
07
09
11
05
07
09
11
Source: IBES, MSCI, Datastream, Citi Investment Research and Analysis
26
24
05
07
09
11
05
07
09
11
It makes a difference when you buy
27
Summary
 The threat of a double-dip recession in the US is
exaggerated. Eurozone debt is a serious issue, but unlikely
to be a game-changer.
 The Australian economy should resume strong growth, led by
mining investment.
 The cash rate is likely to be cut next month.
 The exchange rate is still above fair value. The rest of the
world is on sale for Australians.
 Share markets are cheap.
29
This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’
and is for general information only. Every effort has been made to ensure that it is accurate,
however it is not intended to be a complete description of the matters described. The
presentation has been prepared without taking into account any personal objectives, financial
situation or needs. It does not contain and is not to be taken as containing any securities advice
or securities recommendation. Furthermore, it is not intended that it be relied on by recipients
for the purpose of making investment decisions and is not a replacement of the requirement for
individual research or professional tax advice. BT does not give any warranty as to the
accuracy, reliability or completeness of information which is contained in this
presentation. Except insofar as liability under any statute cannot be excluded, BT and its
directors, employees and consultants do not accept any liability for any error or omission in this
presentation or for any resulting loss or damage suffered by the recipient or any other
person. Unless otherwise noted, BT is the source of all charts; and all performance figures are
calculated using exit to exit prices and assume reinvestment of income, take into account all
fees and charges but exclude the entry fee. It is important to note that past performance is not a
reliable indicator of future performance.
This document was accompanied by an oral presentation, and is not a complete record of the
discussion held.
No part of this presentation should be used elsewhere without prior consent from the author.
For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney
time)
30