Transcript Slide 1
A Global Economic and
Market Outlook
Presented by Dr Chris Caton
March 2011
Production in flooded areas-- % of national
production
2
Queensland black coal production
3
US Housing starts are bumping along the bottom
2.4
(Millions)
Permits
Starts
2
1.6
1.2
0.8
0.4
96
97
Source: Datastream
4
98
99
00
01
02
03
04
05
06
07
08
09
10
11
It keeps taking longer to get back the jobs (%
decline from peak employment)
5
2011 Growth Forecasts (%)
Month of Forecast
A-10
S-10
O-10
N-10
D-10
J-11
F-11
Australia
3.4
3.4
3.5
3.5
3.2
3.1
2.9
New Zealand
3.4
3.3
3.2
3.2
3.3
2.9
2.7
US
2.8
2.4
2.4
2.4
2.7
3.2
3.2
Japan
1.5
1.3
1.2
1.2
1.1
1.2
1.5
China
9.0
9.0
9.0
9.1
9.1
9.2
9.3
Germany
1.7
1.9
2.0
2.1
2.2
2.5
2.5
UK
2.0
2.1
1.9
2.0
2.0
2.1
1.9
“World”
3.3
3.1
3.1
3.1
3.2
3.4
3.5
Source: Consensus Economics
6
Industrial production (2005=100)
7
Food prices relative to US GDP deflator
(1970=100, log scale)
8
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
82
Source: Datastream
9
84
86
88
90
92
94
96
98
00
02
04
06
08
10
China is tracking Japan very closely
10
What goes up…..
11
The Labour market is on the mend
000’s
%
11700
11.0
11100
10.0
Employment (LHS)
10500
9.0
9900
8.0
9300
7.0
8700
6.0
8100
5.0
Unemployment Rate (RHS)
7500
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
12
Australian Inflation
%
9
Headline CPI
8
Underlying inflation
BT
Forecasts
7
6
GST
Effect
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
13
Proportion of prices in the CPI that went up in
the quarter
14
House prices since 2005
15
Gross Domestic Product
%
8
7
Qtly growth
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
16
Capital spending is set to grow further
17
Global Medium-Term Economic Growth and
Inflation Prospects (2011-2023)
Australia
United States
New Zealand
Canada
Norway
Sweden
United Kingdom
Spain
Switzerland
France
Netherlands
Euro Zone
Germany
Japan
Italy
18
Source: Consensus Economics
GDP
Inflation
3.3
2.9
2.7
2.5
2.4
2.5
2.3
2.0
1.9
1.9
1.7
1.7
1.6
1.4
1.0
2.7
1.7
2.6
2.0
2.9
2.0
1.8
1.7
1.4
1.5
2.2
1.8
1.6
0.2
1.8
Asia-Pacific Medium-Term Economic Growth and
Inflation Prospects (2010-2020)
GDP
Consumer Prices
China
8.4
3.3
India
8.1
6.2
Indonesia
6.3
5.5
Malaysia
5.3
2.8
Philippines
5.1
4.5
Singapore
5.0
2.0
Thailand
4.9
3.2
Taiwan
4.9
2.0
South Korea
4.1
3.0
Hong Kong
3.9
3.0
Australia
3.3
2.7
New Zealand
2.7
2.6
Japan
1.4
0.2
Source: Consensus Economics
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Financial Market Forecasts
Now
(4 March)
End-Jun
2011
End-Dec
2011
1.014
0.95
0.87
Official cash rate (%)
4.75
4.75
5.00
10 Year Bond yield (%)
5.59
5.60
5.60
ASX 200
4850
5000
5250
AUD/USD
20
The Australian Dollar and US Trade Weighted
Index
Index
AUD/USD
177
1.10
AUD/USD (RHS)
161
1.00
145
0.90
129
0.80
US TWI inverted (LHS)
113
97
0.60
80
0.50
64
0.40
99
00
Source: Datastream
21
0.70
01
02
03
04
05
06
07
08
09
10
11
Average daily trading range in the Australian dollar
22
Australian Sharemarket Performance – ASX200
7000
6500
6000
5500
5000
4500
4000
3500
3000
2500
2000
1500
1000
93
94
Source: Bloomberg
23
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
The Australian market is again cheap (forward P/E
ratio)
24
World share markets are cheap also
25
It makes a difference when you buy
26
Economics does matter!
27
Morgan Stanley Capital Indexes
3600
Developed Index
Asian Emerging Markets Index
3300
600
550
3000
500
Asian Emerging Markets Index (RHS)
2700
450
2400
400
2100
350
1800
300
1500
250
1200
900
150
600
100
03
04
Source: Datastream
28
200
World Developed Index (LHS)
05
06
07
08
09
10
11
Summary
The global economic recovery continues, albeit at a
moderate pace. This makes it a long recovery.
The Australian economy should continue to grow well,
led in the short term by mining investment. The floods
will have only temporary effects on the macroeconomic
data.
Interest rates should eventually rise further.
The exchange rate is above fair value. The rest of the
world is on sale for Australians.
Share markets are still cheap.
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Australia’s public debt problem is complete
fiction!
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