Transcript Slide 1

A Global Economic and
Market Outlook
Presented by Dr Chris Caton
May 2010
Key Budget parameters
2
It’s the economy, stupid: how the Budget outlook has
changed ( cumulative 2009/10 to 2012/13, $billion)
3
Mission accomplished; real growth in spending is
held below 2%
4
Australia is a paragon when it comes to public
debt
5
Government net debt for various countries –
Australia simply doesn’t have a problem
6
Major savings in the 2010-11 Budget
7
Financial Market Forecasts
Now
(27 May)
End-June
2010
End-Dec
2010
0. 825
0.82
0.80
Official cash rate (%)
4.50
4.50
4.75
10 Year Bond yield (%)
5.32
5.50
5.80
4330
4500
5250
AUD/USD
ASX 200
8
The Australian Dollar and US Trade Weighted
Index
Index
AUD/USD
161
1.00
AUD/USD (RHS)
143
0.89
126
0.78
US TWI inverted (LHS)
108
0.67
90
0.56
72
0.45
99
00
Source: Datastream
9
01
02
03
04
05
06
07
08
09
10
Australian Sharemarket Performance – ASX200
7000
6500
6000
5500
5000
4500
4000
3500
3000
2500
2000
1500
1000
93
94
Source: Bloomberg
10
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
As a result of the recent correction the Australian
market is again cheap (forward P/E ratio)
11
Recoveries from “big ugly bears”
Largest falls in the Australian equity market
110
110
Market peak=100
100
100
90
90
80
80
70
70
60
60
1929
1973
1980
1987
2007
50
40
30
0
12
1
2
3
4
50
40
Years
5
6
30
7
Australian shares still look to be good value
13
US Housing starts have stopped falling
2.4
(Millions)
Permits
Starts
2
1.6
1.2
0.8
0.4
96
97
Source: Datastream
14
98
99
00
01
02
03
04
05
06
07
08
09
10
US Employment is looking better
3mth / 3mth chg(%)
1.8
1.2
0.6
0
-0.6
-1.2
-1.8
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
Source: Datastream
15
2010 Growth Forecasts (%)
Month of Forecast
N-09
D-09
J-10
F-10
M-10
A-10
M-10
Australia
2.7
2.9
2.9
3.0
3.1
3.3
3.2
New Zealand
2.4
2.5
2.5
2.6
2.8
2.8
2.9
US
2.7
2.7
2.9
3.1
3.1
3.2
3.3
Japan
1.4
1.5
1.3
1.5
1.9
2.2
2.5
China
9.6
9.6
9.7
9.8
9.9
9.9
10.2
Germany
1.5
1.7
1.8
1.7
1.7
1.6
1.6
UK
1.3
1.4
1.5
1.4
1.4
1.3
1.3
“World”
2.8
2.9
3.0
3.1
3.2
3.2
3.4
Source: Consensus Economics
16
Real GDP growth in Australia and the US
Year to % change
10
US
Australia
8
6
4
2
0
-2
-4
80
82
Source: Datastream
17
84
86
88
90
92
94
96
98
00
02
04
06
08
10
Retail trade was so much stronger here, but has
been weak lately
18
Export growth *(volume, %change, 9 months to
June quarter 2009)
19
Our exports to China
20
The Labour market is on the mend
000’s
%
11500
12.0
11000
11.0
Employment (LHS)
10500
10000
9.0
9500
8.0
9000
7.0
8500
6.0
8000
Unemployment Rate (RHS)
7500
5.0
4.0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Source: ABS
21
10.0
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
Source: ABS
22
Interest payments as a share of after-tax
household income (%)
23
House Prices - Australia v Sydney
600
Index (1987 = 100)
Sydney
Australia
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
Source: ABS
24
Another look at house prices (in thousands!)
25
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
Source: ABS
26
Global Medium-Term Economic Growth and
Inflation Prospects (2010-2020)
Australia
United States
New Zealand
Canada
Norway
Sweden
United Kingdom
Netherlands
Switzerland
France
Spain
Euro Zone
Japan
Germany
Italy
27
Source: Consensus Economics
GDP
Inflation
3.3
2.8
2.7
2.6
2.5
2.5
2.2
1.9
1.9
1.8
1.7
1.6
1.5
1.4
1.2
2.7
2.2
2.6
2.0
2.3
2.0
2.4
1.7
1.5
1.8
1.9
1.8
0.6
1.5
1.7
Asia-Pacific Medium-Term Economic Growth and
Inflation Prospects (2010-2020)
GDP
Consumer Prices
China
8.6
3.4
India
8.0
na
Indonesia
6.0
5.5
Malaysia
5.2
3.1
Philippines
4.9
4.9
Thailand
4.6
3.0
Singapore
4.5
2.1
Taiwan
4.1
1.8
South Korea
4.0
3.0
Hong Kong
4.0
3.0
Australia
3.3
2.7
New Zealand
2.7
2.6
Japan
1.5
0.6
Source: Consensus Economics
28
Morgan Stanley Capital Indexes
3600
Developed Index
Asian Emerging Markets Index
3300
550
Asian Emerging Markets Index (RHS)
3000
500
2700
450
2400
400
2100
350
1800
300
1500
250
1200
200
World Developed Index (LHS)
900
150
600
100
03
Source: Datastream
29
600
04
05
06
07
08
09
10
Summary
 The global economic recovery continues, with the US
and Emerging Asia doing better than Europe.
 The Australian economy survived the GFC remarkably
well.
 Rates will probably rise further.
 The exchange rate is still above fair value.
 Shares should resume their rise soon.
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