Future Financial Forecast

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Future Financial Forecast An update on the big
economic picture for credit, interest rates and
inflation.
Paul Cahill Chief Executive
Officer
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Discussion Items

• The Global Financial Crisis What Actually
  Happened?
• Where Are We Now?
• What Is It Looking Like Going Forward?
• 4. BRICS and PIGS.
• 5. Close and Questions.

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Item 1.

• The Global Financial Crisis What Actually
  Happened?
• 1.1 Global GDP Growth
• 1.2 Unemployment Rates
• 1.3 Government Debt
• 1.4 Corporate Australia Re-Capitalised
• 1.5 Exchange Rates
• 1.6 Consumer Confidence

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1.1 Global GDP Growth
Challenging financial and economic conditions.
First negative growth year for 75 years.
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1.1 Global GDP Growth

• Australia maintained positive growth through the
  crisis better than any other advanced economy.

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1.1 Global GDP Growth

• Australia has continued to recover toward trend
  levels. Only Asia has rebounded stronger.

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1.1 Global GDP Growth

• RBAs GDP forecast revisions. Dramatic and
  ongoing revisions as conditions improved.

Expectations
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1.2 Unemployment Rates

• Unemployment is lower than nearly all the majors
  and peaked well below market expectations.

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1.2 Unemployment Rates

• Employment actually rose during the crisis,
  reflecting the resilience of the economy and
  usage of part-time staff.

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1.3 Government Debt

• Government debt is particularly low compared to
  other major economies.

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1.4 Corporate Australia Re-Capitalised

• Corporate Australia re-capitalises, with A120
  billion since January 2008.

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1.4 Corporate Australia Re-Capitalised

• Australian Major Banks Net Profit (yearly).

b 16 12 8 4 0 -4
b 16 12 8 4 0 -4
1984 1969 1994 1999 2004 2009
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1.5 Exchange Rates

• Historic exchange rates The Australian dollar
  versus the USD and Euro.

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1.6 Consumer Confidence

• Leading indicators point to an ongoing recovery.
  PMIs in strongly expansionary territory
  confidence also recovering.

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Item 2.

• Where Are We Now?
• 2.1 Consumer Price Inflation
• 2.2 Interest Rates
• 2.3 Consumer Spending Patterns
• 2.4 Wages
• 2.5 Credit Growth

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2.1 Consumer Price Inflation

• Consumer Price Inflation

5 4 3 2 1 0 -1
5 4 3 2 1 0 -1
5 4 3 2 1 0 -1
Year-ended
Quarterly
1997 2000 2003 2006 2009
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2.2 Interest Rates

• The RBA is one of the few to raise rates. Policy
  elsewhere remains highly accommodative.

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2.3 Consumer Spending Patterns

• Household Consumption and Income Growth
  (Year-ended).

6 3 0 -3
6 3 0 -3
Real household consumption
Real household disposable income
1997 2000 2003 2006
2009
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2.3 Consumer Spending Patterns

• Retail sales by Industry (March quarter).

Index 300 250 200 150 100 50
Index 300 250 200 150 100 50
Household goods
Clothing, footwear accessories
Other
Total motor vehicles
Food
Department stores
Cafes, restaurants and takeaway services
1997 2000 2003 2006 2009 2000 2003 2006
2009
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2.4 Wages

• Percentage Change.

6 4 2 0 -2
6 4 2 0 -2
Average earnings
Year-ended
Wage price index
Year-ended
Wage price index quarterly
Average earnings quarterly
1997 2000 2003 2006
2009
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2.5 Credit Growth

• Credit by Sector (Year-ended percentage change)

20 10 0 -10
20 10 0 -10
Housing
Personal
Business
1998 2002 2006
2010
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Item 3.

• What Is It Looking Like Going Forward?

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3 Going Forward

• Strong fundamentals boosted consumer confidence,
  recovering back to pre-crisis levels.

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3 Going Forward

• Its a similar picture for business confidence,
  which is back above pre-crisis levels.

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3 Going Forward

• Recovery is now fuelled by business investment,
  whereas initially driven by the building
  construction.

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3 Going Forward

• The global outlook is a positive backdrop, but
  not without risks.
• Global growth recovery forecasts remain robust
• Despite market nervousness over tightening
  liquidity and sovereign credit
• Pattern remains Asia leading and Europe lagging
• UK PMI at 15 year high, Euro area at 3.5 year
  high, Germany at 10 year high
• Global trade recovered 65 of volumes lost during
  GFC (emerging markets 90)
• Australia and China are intertwined
• Current spot prices for iron ore and coal could
  boost GDP by 1
• Interest rates and GDP growth should surprise on
  the upside
• AUD to weaken in 2H 2010 range trade 86-94 US
  cents

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Item 4.

• BRICs and PIGs

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4 BRICs
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4 Economic Activity in the BRICs

• Industrial production accelerated in China in
  Jan-Feb to the highest level since the start of
  the data series in 2005.

In India, WPI inflation was 9.9yoy in February,
higher than expected. In China, inflation also
picked up to 2.7yoy in February.
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4 BRICs

• The Iron Ore outlook. Australia can expect
  significant upside to its trade accounts.

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4 PIGs

• Relative size of the different Euro Area
  countries.

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4 PIGs Sovereign Debt Crisis
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Item 5.

• Close and Questions