A global economic and market outlook_ BT Financial

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A global economic and market outlook_ BT Financial Powered By Docstoc
					A Global Economic and
Market Outlook
Presented by Dr Chris Caton

October 2012
Euro-area government bond spreads (to German
bonds)




2
The two that matter have clearly improved (long-term
bond yields (%))




3
2012 Growth Forecasts (%)
    Month of Forecast

                 D-11      J-12     F-12   M-12   A-12   M-12   J-12   J-12   A-12   S-12

Australia         3.5      3.4       3.3   3.1    3.1    3.0    3.2    3.3    3.4    3.5

New               2.8      2.6       2.4   2.4    2.3    2.2    2.0    2.4    2.4    2.4
Zealand
US                2.1      2.2       2.2   2.3    2.3    2.3    2.2    2.1    2.2    2.2

Japan             2.0      1.9       1.8   1.9    2.0    2.0    2.5    2.5    2.5    2.4

China             8.3      8.4       8.4   8.4    8.4    8.3    8.1    8.1    7.9    7.7

Germany           0.5      0.5       0.6   0.6    0.7    0.8    0.9    0.9    0.9    0.8

UK                0.7      0.5       0.5   0.6    0.7    0.4    0.3    0.1    -0.2   -0.3

“World”           2.7      2.6       2.6   2.6    2.6    2.6    2.6    2.5    2.6    2.6
    Source: Consensus Economics       




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2013 Growth Forecasts (%)
    Month of Forecast

                 J-12       F-12         M-12   A-12   M-12   J-12   J-12   A-12   S-12

Australia         3.2        3.3         3.1    3.1    3.4    3.2    3.1    3.1    2.9

New               3.2        3.3         3.2    3.1    3.0    3.0    2.9    2.8    2.8
Zealand
US                2.5        2.5         2.6    2.5    2.5    2.4    2.3    2.1    2.1

Japan             1.4        1.4         1.5    1.5    1.5    1.3    1.4    1.4    1.3

China             8.6        8.6         8.6    8.5    8.5    8.4    8.4    8.3    8.1

Germany           1.5        1.5         1.5    1.6    1.6    1.4    1.3    1.2    1.0

UK                1.8        1.8         1.8    1.8    1.8    1.8    1.6    1.4    1.3

“World”           3.2        3.2         3.2    3.1    3.1    3.0    2.9    2.9    2.8
    Source: Consensus Economics       




5
    Real GDP growth in Australia and the US

           Year to % change




    Source: Datastream        



6
It’s the developing world, stupid




7
                             Australia’s Terms of trade
                          (Index 1900-01 to 1999-00 = 100)
      Index                                                                                   Index
200                                                                                                   200



180                                                                                                   180



160                                                                                                   160



140                                                                                                   140

       5-year centred moving average
120                                                                                                   120



100                                                                                                   100



80                                                                                                    80
                                                                          Budget forecasts/
                                                                          projections
60                                                                                                  60
1869-70            1894-95          1919-20           1944-45   1969-70          1994-95       2019-20


 Source:  ABS Catalogue Number 5206.0, RBA and Treasury.
Chinese steel production and iron ore spot prices




9
The labour market went sideways in 2011

            000’s                                                %




                                              Employment (LHS)




                    Unemployment Rate (RHS)




     Source: ABS



10
Contributions to jobs growth (year to May 2012, thousands)




11
                   Employment change by industry
                                   (2003-04 to 2011-12)




Note:  Average annual growth in parentheses.
Source:  ABS Catalogue Number 6291.0.55.003 and Treasury.
Australian Inflation

          %



                                 BT Forecasts



                    GST Effect




     Source: ABS 




13
Interest rate changes do make a difference!




14
House Prices - Australia v Melbourne
      Index (1987 = 100)
650
                                                           Melbourne
600                                                        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 11 12


Source: ABS
We are very expensive when compared with the United States




à




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But not otherwise!




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Prices have fallen everywhere but they may be turning




18
Gross Domestic Product

           %



                                     BT Forecasts



                        GST Effect




     Source: ABS     



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Mining investment is set to soar




20
Another perspective on mining investment




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Global Medium-Term Economic Growth and
Inflation Prospects (2012-2022)
                                                GDP   Inflation
 Australia                                      3.1      2.7
 New Zealand                                    2.6      2.4
 Norway                                         2.6      2.0
 United States                                  2.6      2.3
 Canada                                         2.2      2.0
 United Kingdom                                 2.2      2.6
 Sweden                                         2.1      1.9
 Switzerland                                    1.7      1.2
 Spain                                          1.6      2.0
 France                                         1.5      2.0
 Netherlands                                    1.4      2.0
 Germany                                        1.4      2.0
 Eurozone                                       1.4      2.0
 Japan                                          1.1      0.9
 Italy                                          0.7      2.0

                  Source: Consensus Economics
22
Asia-Pacific Medium-Term Economic Growth and
Inflation Prospects (2012-2022)
                              GDP   Consumer Prices

India                         7.7         6.2
China                         7.3         3.2
Indonesia                     6.2         5.1
Philippines                   4.8         4.3
Malaysia                      4.7         2.6
Thailand                      4.5         3.1
Taiwan                        4.1         1.9
Singapore                     4.0         2.8
South Korea                   3.7         2.8
Hong Kong                     3.5         3.2
Australia                     3.1         2.7
New Zealand                   2.6         2.4
Japan                         1.1         0.9
Source: Consensus Economics



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Financial Market Forecasts



                                    Now       End-Dec    End-June
                                   (5 Oct)     2012        2013

     AUD/USD                        1.024         0.97     0.88


     Official cash rate (%)           3.50        3.00     3.00


     10 Year Bond yield (%)           3.08        3.40     3.70


     ASX 200                         4453        4500      4750




24
The Australian Dollar and US Trade Weighted
Index

        Index                                                AUD/USD

                                             AUD/USD (RHS)




                     US TWI inverted (LHS)




 Source: Datastream        



25
 Australian dollar against Asian share markets

             $A                                               Asian Emerging Markets Index


                                                                  $A (LHS)


                         Asian Emerging Markets Index (RHS)




     Source: Datastream        



26
Australian Sharemarket Performance – ASX200




     Source: Bloomberg



27
The Australian market is still cheap (p/e ratio)




28
All sectors look cheap– resources most of all




29
---- cyclical industrials




30
---- defensive industrials




31
----banks




32
World share markets are cheap (P/E ratio)




33
 Morgan Stanley Capital Indexes

             Developed Index                                     Asian Emerging Markets Index




                Asian Emerging Markets Index (RHS)




                                   World Developed Index (LHS)




     Source: Datastream        



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Summary

à     Eurozone debt is a serious issue; it will drag on for a long time but
     is unlikely to end in catastrophe. We will always worry about China.

à    The Australian economy should continue to experience moderate
     but unbalanced growth, led by mining investment. The mining
     boom will, of course, end eventually.

à    The cash rate is likely to fall again.

à    The exchange rate is above fair value. The rest of the world is still
     on sale for Australians.

à    Share markets are cheap.




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This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ 
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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 
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fees and charges but exclude the entry fee.  It is important to note that past performance is not a 
reliable indicator of future performance. 
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