Transcript Slide 1
A Global Economic and Market Outlook
Presented by Dr Chris Caton
March 2011
2
Production in flooded areas-- % of national production
3
Queensland black coal production
US Housing starts are bumping along the bottom
4
2.4
(Millions) Permits 2 Starts 1.6
1.2
0.8
0.4
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Source: Datastream
5
It keeps taking longer to get back the jobs (% decline from peak employment)
6
2011 Growth Forecasts (%) Month of Forecast Australia New Zealand US Japan China Germany UK “World” A-10 3.4
3.4
2.8
1.5
9.0
1.7
2.0
3.3
S-10 3.4
3.3
2.4
1.3
9.0
1.9
2.1
3.1
O-10 3.5
3.2
2.4
1.2
9.0
2.0
1.9
3.1
Source: Consensus Economics N-10 3.5
3.2
2.4
1.2
9.1
2.1
2.0
3.1
D-10 3.2
3.3
2.7
1.1
9.1
2.2
2.0
3.2
J-11 3.1
2.9
3.2
1.2
9.2
2.5
2.1
3.4
F-11 2.9
2.7
3.2
1.5
9.3
2.5
1.9
3.5
7
Industrial production (2005=100)
8
Food prices relative to US GDP deflator (1970=100, log scale)
Real GDP growth in Australia and the US
9
10.0
Year to % change 7.5
5.0
2.5
US Australia 0.0
-2.5
-5.0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 Source: Datastream
China is tracking Japan very closely
10
What goes up…..
11
The Labour market is on the mend
12
11700 11100 10500 9900 000’s Employment (LHS) 9300 8700 7.0
6.0
8100 5.0
Unemployment Rate (RHS) 7500 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 4.0
%
11.0
10.0
9.0
8.0
Source: ABS
Australian Inflation 6 5 9
%
8 7 Headline CPI Underlying inflation GST Effect BT Forecasts 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
16
% 8 7 6 5 4 -1 -2 -3 3 2 1 0 Qtly growth Year-to growth Non-farm year-to growth GST Effect BT Forecasts 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
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 GDP 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
Inflation 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
Source: Consensus Economics
18
Asia-Pacific Medium-Term Economic Growth and Inflation Prospects (2010-2020) China India Indonesia Malaysia Philippines Singapore Thailand Taiwan South Korea Hong Kong Australia New Zealand Japan Source: Consensus Economics GDP 8.4
8.1
6.3
5.3
5.1
5.0
4.9
4.9
4.1
3.9
3.3
2.7
1.4
Consumer Prices 3.3
6.2
5.5
2.8
4.5
2.0
3.2
2.0
3.0
3.0
2.7
2.6
0.2
19
Financial Market Forecasts AUD/USD Official cash rate (%) 10 Year Bond yield (%) ASX 200 Now (4 March) 1.014
4.75
5.59
4850 End-Jun 2011 0.95
4.75
5.60
5000 End-Dec 2011 0.87
5.00
5.60
5250
20
The Australian Dollar and US Trade Weighted Index
21
177 Index 161 145 129 113 97 80 64 99 00 US TWI inverted (LHS) 01 02 03 04 05 06 AUD/USD (RHS) 07 08 09 10 AUD/USD 1.10
1.00
0.90
0.80
0.70
0.60
0.50
11 0.40
Source: Datastream
Average daily trading range in the Australian dollar
22
Australian Sharemarket Performance – ASX200
23
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
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
28
3600 Developed Index 3300 3000 2700 2400 2100 Asian Emerging Markets Index (RHS) 1800 1500 1200 900 600 03 04 05 06 World Developed Index (LHS) 07 08 Asian Emerging Markets Index 600 550 500 450 400 350 09 10 11 300 250 200 150 100 Source: Datastream
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.
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
Australia’s public debt problem is complete fiction!
31