Transcript Pitchbook US template

AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Mind the growth gap!
STRICTLY PRIVATE AND CONFIDENTIAL
February 2013
Stephen Walters
Chief Economist
[email protected]
61-2-9003 7980
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ir Group February.pptx
Global economy - main macroeconomic themes
Global lift is coming – 3.5% growth rate by end-2013!
Accelerating growth in EM economies offsetting sluggish H1 in US
Cyclical lift becoming established as tail risks recede into the background
Risk of EU meltdown, US fiscal cliff and China hard landing receding
Cyclical improvement in production as inventories are run down
Final demand improving – retail sales and corporate spending
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Inflation to stay low
Still lots of slack in DM – EM overheating risk diminished
Central banks to maintain policy accommodation – Fed “on hold” until mid-2015
BoJ to join other major central banks with more assertive easing from April
Governments travelling down long road to fiscal sustainability
Downside risk:
EU breakup risk has receded, not disappeared
Upside risks:
EM economies overheat again, lifting inflation
Extreme policy accommodation sees asset prices soar
1
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Global GDP – developed economies sagging – EM Asia improving
GDP growth - major economies and zones
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
% over year
2011
2012
2013
Last change
China
Asia ex. Japan
India
Latin America
New Zealand
Emerging Europe
Australia
Canada
United States
United Kingdom
Japan
Euro-area
9.3
7.5
6.5
4.2
1.4
4.8
2.0
2.4
1.8
0.9
-0.7
1.5
7.8
6.2
5.2
2.3
2.3
2.5
3.5
2.0
2.2
0.0
2.1
-0.5
8.2
6.6
5.8
3.4
2.8
2.4
2.5
1.7
1.6
1.0
0.8
0.0

Australia's export partners
4.1
4.2
3.9

Developed economies
Emerging economies
1.3
6.1
1.2
4.6
1.0
5.1

World
3.0
2.4
2.4
-
Source: J.P. Morgan.
2









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Global forecasts – weakest expansion since WW II … but no double dip
G3 economies GDP growth - index
Global GDP growth - % over year
% change, saar
6
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Index 1Q 2007 = 100
JPMorgan
forecasts
106
US
4
104
2
102
0
100
-2
98
-4
96
-6
Europe
Japan
94
-8
04
05
06
07
08
09
10
11
12
13
92
07Q1
08Q1
09Q1
10Q1
11Q1
Source: BEA, Eurostat, ESRI, J.P.Morgan
14
Source: ABS, J.P.Morgan.
3
12Q1
13Q1
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Global growth – China still the bright spot
Sequential annualised GDP growth
% change on previous period, saar
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
2012
2013
Q1
Actual
Q2
Actual
Q3
Actual
Q4
Forecast
Q1
Forecast
Q2
Forecast
Q3
Actual
Q4
Forecast
US
2.0
1.3
3.1
-0.1
1.5
1.5
2.5
3.0
Europe
0.0
-0.7
-0.2
-1.8
0.0
0.8
1.3
1.5
Japan
5.2
0.3
-3.5
0.8
1.2
2.2
2.1
2.9
China
6.6
7.1
8.0
9.4
8.0
8.2
8.2
8.2
Asia ex-Japan
7.3
5.8
5.8
7.0
6.6
6.6
6.8
7.0
Developed world
1.7
0.4
0.9
-0.2
0.8
1.4
2.0
2.4
Emerging world
5.4
4.1
4.3
5.2
5.1
5.4
5.7
5.6
Australia
5.3
2.3
1.9
1.1
3.7
2.8
2.4
2.4
Global
3.0
1.7
2.1
1.6
2.3
2.8
3.3
3.5
Source: J.P. Morgan.
4
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US economy – housing now the bright spot! That’s how far we’ve come
Housing starts - a clear turn higher
Non-farm payrolls - monthly change
Millions of units, saar
Chg (000s)
500
2.5
250
2.0
0
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
1.5
-250
1.0
-500
0.5
-750
0.0
-1000
95
97
99
01
03
05
07
09
11
13
00 01 02 03 04 05 06 07 08 09 10 11 12
Source: BEA, J.P.Morgan.
Source: BLS, J.P.Morgan.
5
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US fiscal calamity – debt ceiling debate now delayed until May
Budget balance as share of GDP
Recent history of US debt limit
% of GDP
USD, tn
4
18
16
0
14
Debt ceiling
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
12
-4
10
Total public debt
8
-8
6
-12
4
47 52 57 62 67 72 77 82 87 92 97 02 07 12
96
98
00
02
04
06
Source: Congressional Research Service
Source: US Treasury
6
08
10
12
14
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ir Group February.pptx
Europe – Greek tragedy
GDP history - 27 Euro area economies
Euro-area unemployment rate
% q/q, saar
Percent of labor force, sa
11
6
4
10
2
0
9
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
-2
-4
8
-6
-8
7
-10
6
-12
04
05
06
07
08
09
10
11
12
00
02
04
Source: Eurostat, J.P.Morgan.
Source: ABS, J.P.Morgan.
7
06
08
10
12
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ir Group February.pptx
Japan – two decades of under-performance coming to an end?
Japan GDP growth
Japan's population
% q/q
% change, oya
4
2.5
2.0
2
1.5
1.0
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
0
0.5
-2
0.0
-4
-0.5
05
06
07
08
09
10
11
12
Source: ESRI, J.P.Morgan.
48 53 58 63 68 73 78 83 88 93 98 03 08
Source: ABS, J.P.Morgan.
8
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China – soft landing now confirmed
China GDP growth
Fixed asset investment - public and private
% q/q, saar
%oya, 3mma
20
60
Public
sector FAI
15
Private
sector FAI
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
40
10
20
5
0
0
03
04
05
06
07
08
09
10
11
06
12
07
08
Source: NBS, J.P.Morgan.
Source: J.P. Morgan.
9
09
10
11
12
13
14
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ir Group February.pptx
Major central bank balance sheets continuing to expand
Major central bank balance sheets
G3 central bank balance sheet and gold
% of GDP
USD, bn
35
ECB
30
USD per ounce
9,500
2,000
8,500
1,800
BoJ
1,600
7,500
25
6,500
1,400
G3 CB balance sheets
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
BoE
1,200
5,500
20
1,000
4,500
800
Fed
15
3,500
600
Gold
2,500
10
400
1,500
5
200
99
2007
2008
2009
2010
2011
2012
2013
01
03
05
07
09
Source: Federal Reserve, BoJ, ECB, Reuters.
Source: Federal Reserve, BoJ, ECB, BOE
10
11
13
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ir Group February.pptx
Australian economy - main macroeconomic themes
Sub-trend growth in 2013 – loss of momentum carrying over from late in 2012
Mining boom is not over – but peak in investment approaching …
… what will replace mining investment after the peak?
- indebted consumers remain in cautious mood
- governments (state and federal) in austerity mode
- manufacturing/tourism/retail hurt by high AUD
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Exports to improve … but not until later in 2013
Soft landing for housing – prices supported by plunging supply
Policy outlook:
RBA to ease again … little evidence of traction from earlier moves
Government (finally) has jettisoned silly surplus pledge
AUD to stay high – official appetite for AAA-rated paper unlikely to wane
Downside risk:
Gap between mining boom and non-mining growth gets wider
Upside risk(s):
RBA over-eggs the policy pudding, federal fiscal splurge
11
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ir Group February.pptx
Aussie summary: the growth gap means sub-trend growth in 2013
Australia – real GDP growth and contributions to GDP
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Annual change (%)
2007
2008
2009
2010
2011
2012(f)
2013(f)
2014 (f)
Household spending
5.6
2.0
0.7
3.0
3.3
3.5
2.0
2.4
Consumer caution
Government consumption
2.9
5.1
1.4
3.6
2.5
3.6
0.7
1.6
Surplus promise
Business investment
15.0
9.2
-3.7
-0.1
17.7
18.7
10.2
3.8
Mining boom peaks
Government investment
3.3
20.9
2.2
19.2
-8.5
-6.1
-4.9
3.8
Deficit reduction plan
Dwelling investment
2.0
2.6
-4.2
3.5
0.7
-4.9
6.3
4.7
Construction recovers
Change in inventories (cont.)
0.8
-0.4
-0.7
0.6
0.3
-0.1
-0.3
0.1
Lower resource stocks
Exports
3.2
3.6
2.1
5.7
-0.8
5.5
4.9
5.0
Global growth improving
Imports
12.6
11.4
-8.9
14.3
10.6
6.7
4.6
2.8
Capex boom drags in imports
Net Exports (cont.)
-1.4
-1.3
2.1
-1.2
-2.2
-0.2
0.1
0.5
GDP
4.6
2.7
1.4
2.6
2.4
3.5
2.5
3.25
Source: ABS. J.P.Morgan.
12
Sub-trend growth in '13
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Aussie summary – long decline in productivity growth turning around?
Aussie GDP - quarterly profile
Latest Queensland floods:
%, q/q
• Not as bad as those of 2010-11, which also
featured Cyclone Yasi
2.0
• Insured losses two summers ago were $2.4 billion
– much less this time (closer to $600 million)
1.5
J.P. Morgan
forecasts
• Main differences:
1.0
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
• Brisbane CBD not flooded
0.5
• Banana crop not wiped out, so inflation
impact smaller
0.0
• Coal mines not flooded
Qld. floods
GFC
-0.5
• Some rail lines underwater but not washed
away – miners can divert coal to other ports
• No floods in the west
-1.0
2006
2007
2008
2009
2010 2011
2012
2013
Source: ABS, J.P.Morgan.
13
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Terms of trade boom lifted national income …
Terms of trade peaked at 100 - year highs!
National income and productivity
Index, 2011-12=100, nsa
Index
Index
120
175
175
100
Real gross domestic
income per hour
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
150
150
80
Real GDP
per hour
60
40
60
65
70
75
80
85
90
95
00
05
10
125
125
100
100
85
Source: ABS, J.P.Morgan.
90
95
Source: ABS, J.P.Morgan.
14
00
05
10
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… masking a diminishing industrial base and domestic tourism industry …
Manufacturing industry - share of GDP
Overseas tourist arrivals and departures
%
000s
17
AUD
700
1.1
650
15
1.0
AUD (rhs)
600
0.9
550
500
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
13
0.8
Arrivals
450
0.7
400
11
350
0.6
Departures
300
9
0.5
250
7
200
74
79
84
89
94
99
04
09
95
97
99
01
Source: ABS, J.P.Morgan.
Source: ABS, J.P.Morgan.
15
03
05
07
09
11
13
0.4
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… job losses in banking and a struggling retail industry
Employment - finance and insurance
Online retail sales and traditional sales
Thousands
Index: Jan. 2010 = 100
450
260
240
Now $12.8 billion p.m. (up 23% oya) 6% of total retail spending
NAB online index
220
400
200
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
180
350
160
140
300
ABS retail sales
ex. takeaway food
120
100
80
Jan 10 Jul 10
250
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Source: NAB, ABS
Source: ABS.
16
Jan 11
Jul 11
Jan 12 Jul 12
Jan 13
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ir Group February.pptx
Theme No. 1: mining boom not over … but peak in spending is nearing
Commodity prices, mining investment, exports
Mining investment
Index: 1Q 2004 = 100, both scales
% of GDP
800
7
700
6
600
5
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
500
4
400
Investment
3
300
Export prices
2
200
100
1
Exports
0
0
04
06
08
10
12
Source: ABS, J.P.Morgan.
88
93
Source: ABS, J.P.Morgan.
17
98
03
08
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_CB_December.pptx
Major projects in Australia – the growing investment pipeline
Australia's investment pipeline - mining and non-mining
Change in value of mining investment pipeline
$ billion
$ billion, change on previous quarter
1000
60
New record high
900
40
800
20
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
700
600
0
500
-20
400
2008
2009
2010
2011
05
2012
06
07
08
Source: Deloitte Access Economics.
Source: Deloitte Access Economics.
18
09
10
11
12
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_CB_December.pptx
Australia’s investment pipeline – clearly dominated by mining
Value
$A million
Investment pipeline - value of projects
$ billion
500
450
Mining
400
350
300
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
250
Infrastructure
200
150
Other
100
50
0
05
07
09
11
Source: Deloitte Access Economics.
19
Project
Status
Location
52,000
Gorgon LNG (trains 1-3)
Under construction
Western Australia
43,000
Kimberley Gas Hub
Under consideration
Western Australia
34,000
Ichthys gas field
Under construction
Northern Territory
29,000
Wheatstone LNG
Under construction
Western Australia
23,000
Australia Pacific LNG
Under construction
Queensland
20,000
Curtis LNG project
Under construction
Queensland
19,000
LNG facility (GLNG)
Under construction
Queensland
12,000
Prelude LNG project
Under construction
Western Australia
10,000
Pluto 2 LNG project
Under consideration
Western Australia
10,000
Carmichael Coal mine
Under consideration
Queensland
10,000
Scarborough LNG
Possible
Western Australia
10,000
Gorgon LNG
Possible
Western Australia
9,500
Roy Hill 1 iron ore
Committed
Western Australia
8,300
Galilee Basin coal
Under consideration
Queensland
7,500
Coal production plant
Possible
Unallocated
7,400
West Pilbara iron ore
Under consideration
Western Australia
6,900
Alpha Coal Project (Stage 1)
Committed
Queensland
6,220
Solomon iron ore
Possible
Western Australia
6,000
Wandoan coal mine
Possible
Queensland
5,940
Greater Sunrise gas
Possible
Northern Territory
5,000
South East Longtom
Possible
Unallocated
5,000
North Rankin LNG
Under construction
Western Australia
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_CB_December.pptx
Major resource projects in Australia – status of the pipeline
Australia’s mining investment pipeline – December 2012
Project conception
Possible
Up $25 billion (35%) since Sept.
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Under consideration
$43 bill - Browse LNG Kimberley gas hub
$20 bil. - Curtis Island gas
$10 bil - Carmichael coal
$9.5 bil - Roy Hill iron ore
Up $22 billion (21%) since Sept.
$8.3 bil - China First coal
Down $1 billion (3%) since Sept.
$6.9 bil - Alpha coal
$2.5 bil. Greater Western Flank oil & gas
$2.2 bil. Nummuldi iron ore
Committed
Under construction
Project completion
$13 bil. - Greater Sunshine gas
$10 bil - Scarborough LNG
$10 bil.- Gorgon LNG (4th train)
$7.5 bil. - Allied coal
$52 bil - Gorgon LNG
$34 bil - Ichthys gas field
$29 bil - Wheatstone LNG
$23 bil. - Pacific LNG
Up $9 billion (4%) since Sept.
0
25
50
75
100
125
150
$ billion
Source: Deloitte Access Economics.
20
175
200
225
250
275
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_CB_December.pptx
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Major resource projects in Australia
Source: Bureau of Resource and Energy Economics.
21
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ir Group February.pptx
Australia’s increased leverage to China
GDP growth - Australia, China and the US
China imports - iron ore still trending higher
% oya, both scales
Index, 2007=100, sa
6
15
225
14
5
Iron ore
200
13
4
175
12
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
3
11
2
150
10
US (lhs)
125
9
1
8
100
7
75
Crude
and
refined oil
0
China (rhs)
-1
Australia (lhs)
Copper
6
50
-2
5
90
95
00
05
08
10
09
Source: NBS, J.P. Morgan
Source: J.P. Morgan.
22
10
11
12
13
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ir Group February.pptx
Commodity prices – iron ore rebound unlikely to be sustained
Coal (thermal) and iron ore prices
Base metal prices
USD per tonne
350
$,000s, mt
$,000s, mt
60
10
Coal
Nickel
50
280
40
210
8
Copper
6
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Lead
30
140
Zinc
4
20
70
Iron ore
2
10
0
0
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
81
86
91
Source: IMF, J.P. Morgan
Source: J.P. Morgan
23
0
96
01
06
11
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ir Group February.pptx
Theme No. 2: What will fill the gap? Retail spending sagged into year-end
Retail sales by category
Consumers and business confidence up
% oya
Index
15
130
Non-discretionary (food,
clothing, other)
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
10
5
Net balance
WMI consumer
20
120
10
110
0
100
-10
90
-20
0
80
NAB business
Discretionary (house. goods,
dept. stores, cafes and rest.)
-5
05
06
07
08
09
10
11
12
70
13
05
06
07
08
Source: Westpac-MI, NAB
Source: ABS, J.P.Morgan.
24
09
10
11
12
13
-30
-40
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ir Group February.pptx
Theme No. 2: Households to stay cautious as unemployment rises …
Employment to population and participation
Unemployment rate - currently at 5.4%
%
Percent
66
12
Participation rate
64
10
62
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
8
J.P. Morgan
forecast
60
X
6
58
Employment to population
4
56
54
79
84
89
94
99
04
09
2
14
79
84
89
Source: ABS, J.P.Morgan.
Source: ABS, J.P. Morgan.
25
94
99
04
09
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ir Group February.pptx
Theme No. 2: … but indebted households cushioned by mortgage buffer
Household interest payments and debt
Household mortgage interest buffer
% of income, both scales
% of outstanding loans
13.5
200
14.00
175
12.75
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
150
125
10.25
100
9.00
75
7.75
50
6.50
25
5.25
0
4.00
82
87
92
97
02
07
13.0
19
12.5
18
12.0
17
No. of months
11.5
Debt servicing
77
20
% of outstanding loans
11.50
Debt
No. of months
15
11.0
12
14
2008
Source: RBA, J.P.Morgan.
2009
Source: RBA, J.P.Morgan.
26
2010
2011
2012
2013
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ir Group February.pptx
Theme No. 2 (cont.): closing the gap - governments in austerity mode
Change in Budget balance, % of GDP
Real growth in Commonwealth expenditure
Percent
Nominal growth deflated by CPI
20
3.5
3.0
15
Now smaller, but
as yet undisclosed
Labor governments
2.5
10
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
2.0
Coalition
governments
1.5
MYEFO
forecasts
5
1.0
0
0.5
0.0
'74
'87 '88
'89
'95
'98
'00
-5
'03 '13(f)
72
Source: Budget papers
27
77
82
87
92
97
02
07
12
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ir Group February.pptx
Theme No. 3: higher exports will help to close the gap … but not until later in 2013
Export destinations - shares of total
Global nominal GDP and Australian exports
% of total exports
%oya
%oya
15
35
40
China
Exports
30
30
10
25
20
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Japan
20
5
10
15
Korea
0
India
10
0
GDP
-10
5
EU27
0
07
08
09
10
11
12
-5
-20
92
13
97
Source: ABS, J.P. Morgan
Source: ABS, J.P.Morgan.
28
02
07
12
K:\Private\ECONOMICS\SBW\Presentations\2013\Mo
ir Group February.pptx
Theme No. 4: Soft landing for housing – still not building enough homes
House prices by state
Housing starts - still not building enough homes
$ 000s
'000s - annual rate
200
500
WA
450
400
180
NSW
Queensland
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
350
160
Victoria
300
250
140
200
Tasmania
150
120
Average since 1985
100
50
100
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
85
90
Source: ABS, J.P. Morgan
Source: RP Data, J.P.Morgan.
29
95
00
05
10
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ir Group February.pptx
Policy outlook: RBA officials worried about lack of lift in non-mining economy
RBA cash target rate - Australia
Mining and non-mining output
Percent per annum, end of period
% oya
15
8
Mining
7
10
Non-mining
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
6
5
5
0
4
-5
3
2
-10
06
07
08
09
10
11
12
13
14
00
02
04
Source: ABS, J.P.Morgan.
Source: ABS, J.P.Morgan.
30
06
08
10
12
K:\Private\ECONOMICS\SBW\Presentations\2013\Mo
ir Group February.pptx
Housing credit growth now the weakest since 1970s
Credit growth by category
RBA cash rate and monetary conditions
% oya
Percent
Percent, deviation from average
8
40
8
6
7
30
4
Cash rate (lhs)
Other personal
Housing
6
2
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
20
0
5
-2
10
4
-4
-6
0
3
MCI (rhs)
Business
-10
-8
2
77
82
87
92
97
02
07
-10
00
12
Source: RBA, J.P.Morgan.
02
04
Source: RBA, J.P.Morgan.
31
06
08
10
12
K:\Private\ECONOMICS\SBW\Presentations\2013\Mo
ir Group February.pptx
Aussie inflation to stay benign as output gap widens … leaving RBA wiggle room
Inflation - headline and core
Australia's output gap
%oya
%, annual growth
6
5
Headline
4
4
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Potential
2
3
Actual
2
0
Core
RBA target range
1
-2
03
05
07
09
11
90
95
Source: ABS, J.P.Morgan.
Source: ABS, J.P. Morgan
32
00
05
10
K:\Private\ECONOMICS\SBW\Presentations\2013\Mo
ir Group February.pptx
J.P. Morgan’s predictive RBA “tool” suggests easing cycle is over!
Actual vs probability weighted average from JPM
Forecasts
Actual moves
50
bps
25
0
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
-25
Tool prediction
-50
-75
-100
Predicted move
98
Tool based on:
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
JPMorgan forecasts for core inflation, unemployment rate, capacity utilization,
standard variable mortgage rate, global manufacturing PMI, global policy rate, AUD.
33
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ir Group February.pptx
Policy outlook: government finally abandoned silly surplus pledge
Commonwealth budget forecasts
% of GDP
Australian govt. revenue and expenditure
% of GDP
MYEFO forecasts
2
28
Expenditure
26
0
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
24
-2
22
Revenue
20
-4
18
-6
16
71
76
80
85
90
95
00
05
10
1971 1976 1981 1986 1991 1996 2001 2006 2011
Source: Budget papers
Source: Budget papers
34
K:\Private\ECONOMICS\SBW\Presentations\2013\Mo
ir Group February.pptx
State of the states - recent growth performance
State government operating balances
State performance
A$, mn
Real final demand, %oya
500
10
0
-500
8
-1000
6
-1500
-2000
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
4
-2500
-3000
2
-3500
-4000
0
-4500
-5000
-2
-5500
-4
-6000
-6500
-6
NSW
Vic
Qld
SA
WA
-7000
Tas
NSW
Source: ABS, J.P.Morgan.
Source: ABS.
35
VIC
QLD
SA
WA
K:\Private\ECONOMICS\SBW\Presentations\2013\Mo
ir Group February.pptx
Markets: AUD to stay above parity … Australia seen as a safe haven
Commodity prices and AUD - last two decades
AUD and iron ore prices - last two years
Index
RBA Index
170
USD per tonne
AUD, TWI
180
80
300
AUD (lhs)
280
AUD, NEER
150
78
140
260
240
76
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Commodity prices, USD
130
220
100
200
74
180
160
110
60
72
140
Iron ore average price (rhs)
90
70
2011
20
95
97
99
01
03
05
07
09
11
13
Source: Bloomberg
Source: J.P. Morgan
36
120
100
2012
2013
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ir Group February.pptx
AUD now the Swiss franc of the Pacific
Australia's 10-year bond spread over other AAAs
Nominal
Bond
Bond
GDP share,
market market, %
10 year
% size*, USD
of total bond yield
Country ^
Spread v.
Aus. 10yr
Norway
Germany
29%
1,316
49%
1.57
-174
Canada
14%
407
15%
1.88
-143
United Kingdom +
20%
308
11%
2.01
-130
Canada
Australia
12%
207
8%
3.31
-
Sweden
3%
102
4%
0.96
-235
5%
96
4%
0.65
-266
Netherlands
Sweden
4%
84
3%
1.78
-153
Germany
Singapore
2%
65
2%
1.41
-190
The Netherlands +
7%
58
2%
1.69
-162
Singapore
Norway
3%
42
2%
2.36
-95
Denmark
100%
2,684
100%
1.76
-172
Switzerland
(Ave)
(Ave)
Denmark
Switzerland
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Basis points
Total
+
UK
0
^ AAA rated by all three ratings agencies.
+ On negative watch.
Conventional bonds only - no linkers or T-bills.
Source: Bloomberg.
37
50
100
150
200
250
300
K:\Private\ECONOMICS\SBW\Presentations\2013\Mo
ir Group February.pptx
Markets: Aussie bonds still very alluring to offshore investors
Foreign inflows to Aussie fixed income
Share of AUD government bonds held offshore
A$ million
80%
30,000
70%
25,000
60%
20,000
50%
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
15,000
10,000
40%
5,000
30%
0
20%
-5,000
Dec-88 Feb-93
Apr-97
10%
Sep-88
Jun-01 Aug-05 Oct-09
Jun-93
Mar-98
Source: RBA, AOFM, J.P.Morgan.
Source: ABS, J.P.Morgan.
38
Nov-02
Aug-07
May-12
K:\Private\ECONOMICS\SBW\Presentations\2013\Mo
ir Group February.pptx
Markets: Aussie equities now outperforming
ASX 200 and analysts' earnings estimates
Aussie and US equity markets
All Ords
Index
S&P 500
7000
% oya
1600
5000
1400
4800
12
1200
4600
10
4400
8
4200
6
Earnings expectations (rhs)
14
US (rhs)
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
6000
5000
1000
4000
Australia (lhs)
3000
2007
2008
2009
2010
2011
2012
2013
800
Market index (lhs)
600
2014
4000
2010
Source: J.P. Morgan.
39
4
2011
2012
K:\Private\ECONOMICS\SBW\Presentations\2013\Mo
ir Group February.pptx
Federal election: politics to heat up as election nears
Opinion polling: two-party preferred vote
% of total
60
Coalition
Latest federal election opinion poll results
55
Other (11%)
Greens (9%)
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Liberal (44%)
50
Labor (32%)
45
Nationals (4%)
Source: Newspoll.%)
Labor
40
2008
2009
2010
2011
2012
2013
2014
Source: Newspoll
40
AUSTRALIA & THE WORLD – ECONOMIC UPDATE
Mind the growth gap!
STRICTLY PRIVATE AND CONFIDENTIAL
February 2013
Stephen Walters
Chief Economist
[email protected]
61-2-9003 7980