Transcript Slide 1
A Global Economic and Market Outlook
Presented by Dr Chris Caton
May 2010
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Key Budget parameters
It’s the economy, stupid: how the Budget outlook has changed ( cumulative 2009/10 to 2012/13, $billion)
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4
Mission accomplished; real growth in spending is held below 2%
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Australia is a paragon when it comes to public debt
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Government net debt for various countries – Australia simply doesn’t have a problem
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Major savings in the 2010-11 Budget
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Financial Market Forecasts AUD/USD Official cash rate (%) 10 Year Bond yield (%) ASX 200 Now (27 May) 0. 825 4.50
5.32
4330 End-June 2010 0.82
4.50
5.50
4500 End-Dec 2010 0.80
4.75
5.80
5250
The Australian Dollar and US Trade Weighted Index
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161 Index AUD/USD 1.00
AUD/USD (RHS) 143 126 0.89
0.78
US TWI inverted (LHS) 108 90 0.67
0.56
72 99 00 01 02 03 04 05 06 07 08 09 10 0.45
Source: Datastream
Australian Sharemarket Performance – ASX200
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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 Source: Bloomberg
As a result of the recent correction the Australian market is again cheap (forward P/E ratio)
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Recoveries from “big ugly bears”
110 100 90 80 70 60 50 40 30 0
Largest falls in the Australian equity market
Market peak=100 1 2 3 4 1929 1973 1980 1987 2007 5 6 60 50 40 Years 7 30 110 100 90 80 70 12
Australian shares still look to be good value
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US Housing starts have stopped falling
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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 Source: Datastream
US Employment is looking better
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1.8
3mth / 3mth chg(%) 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
2010 Growth Forecasts (%) Month of Forecast Australia New Zealand US Japan China Germany UK “World” N-09 2.7
2.4
2.7
1.4
9.6
1.5
1.3
2.8
D-09 2.9
2.5
2.7
1.5
9.6
1.7
1.4
2.9
J-10 2.9
2.5
2.9
1.3
9.7
1.8
1.5
3.0
Source: Consensus Economics
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F-10 3.0
2.6
3.1
1.5
9.8
1.7
1.4
3.1
M-10 3.1
2.8
3.1
1.9
9.9
1.7
1.4
3.2
A-10 3.3
2.8
3.2
2.2
9.9
1.6
1.3
3.2
M-10 3.2
2.9
3.3
2.5
10.2
1.6
1.3
3.4
Real GDP growth in Australia and the US
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10 Year to % change 8 6 4 US Australia 2 0 -2 -4 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 Source: Datastream
Retail trade was so much stronger here, but has been weak lately
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Export growth *(volume, %change, 9 months to June quarter 2009)
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Our exports to China
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The Labour market is on the mend
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11500 000’s 11000 10500 10000 9500 9000 8500 Employment (LHS) 8000 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 5.0
4.0
%
12.0
11.0
10.0
9.0
8.0
7.0
6.0
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 Source: ABS
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Interest payments as a share of after-tax household income (%)
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House Prices - Australia v Sydney 600 Index (1987 = 100) 550 500 450 400 350 Sydney Australia 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
Another look at house prices (in thousands!)
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Gross Domestic Product
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% 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 Source: ABS
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 GDP 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
Inflation 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
Source: Consensus Economics
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Asia-Pacific Medium-Term Economic Growth and Inflation Prospects (2010-2020) China India Indonesia Malaysia Philippines Thailand Singapore Taiwan South Korea Hong Kong Australia New Zealand Japan Source: Consensus Economics GDP 8.6
8.0
6.0
5.2
4.9
4.6
4.5
4.1
4.0
4.0
3.3
2.7
1.5
Consumer Prices 3.4
na 5.5
3.1
4.9
3.0
2.1
1.8
3.0
3.0
2.7
2.6
0.6
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Morgan Stanley Capital Indexes
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3600 Developed Index 3300 3000 2700 2400 2100 1800 1500 1200 900 600 03 04 Source: Datastream 05 Asian Emerging Markets Index 600 Asian Emerging Markets Index (RHS) 550 500 450 400 350 World Developed Index (LHS) 300 250 200 150 100 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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Small business variable lending rates
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