a global economic and market outlook
DESCRIPTION
A Global Economic and Market Outlook. Presented by Dr Chris Caton. May 2010. Key Budget parameters. It’s the economy, stupid: how the Budget outlook has changed ( cumulative 2009/10 to 2012/13, $billion). Mission accomplished; real growth in spending is held below 2%. - PowerPoint PPT PresentationTRANSCRIPT
A Global Economic and Market Outlook
May 2010
Presented by Dr Chris Caton
2
Key Budget parameters
3
It’s the economy, stupid: how the Budget outlook has changed ( cumulative 2009/10 to 2012/13, $billion)
4
Mission accomplished; real growth in spending is held below 2%
5
Australia is a paragon when it comes to public debt
6
Government net debt for various countries – Australia simply doesn’t have a problem
7
Major savings in the 2010-11 Budget
8
Financial Market Forecasts
Now(27 May)
End-June2010
End-Dec2010
AUD/USD 0. 825 0.82 0.80
Official cash rate (%) 4.50 4.50 4.75
10 Year Bond yield (%) 5.32 5.50 5.80
ASX 200 4330 4500 5250
9
The Australian Dollar and US Trade Weighted Index
Source: Datastream
72
90
108
126
143
161
99 00 01 02 03 04 05 06 07 08 09 10
0.45
0.56
0.67
0.78
0.89
1.00Index AUD/USD
US TWI inverted (LHS)
AUD/USD (RHS)
10
Australian Sharemarket Performance – ASX200
Source: Bloomberg
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
6500
7000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
11
As a result of the recent correction the Australian market is again cheap (forward P/E ratio)
12
Recoveries from “big ugly bears”
30
40
50
60
70
80
90
100
110
0 1 2 3 4 5 6 730
40
50
60
70
80
90
100
110
19291973198019872007
Largest falls in the Australian equity market
Market peak=100
Years
13
Australian shares still look to be good value
14
US Housing starts have stopped falling
Source: Datastream
0.4
0.8
1.2
1.6
2
2.4
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Permits Starts
(Millions)
15
US Employment is looking better
Source: Datastream
-1.8
-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
3mth / 3mth chg(%)
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2010 Growth Forecasts (%)
Month of Forecast
N-09 D-09 J-10 F-10 M-10 A-10 M-10
Australia 2.7 2.9 2.9 3.0 3.1 3.3 3.2
New Zealand 2.4 2.5 2.5 2.6 2.8 2.8 2.9
US 2.7 2.7 2.9 3.1 3.1 3.2 3.3
Japan 1.4 1.5 1.3 1.5 1.9 2.2 2.5
China 9.6 9.6 9.7 9.8 9.9 9.9 10.2
Germany 1.5 1.7 1.8 1.7 1.7 1.6 1.6
UK 1.3 1.4 1.5 1.4 1.4 1.3 1.3
“World” 2.8 2.9 3.0 3.1 3.2 3.2 3.4
Source: Consensus Economics
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Real GDP growth in Australia and the US
Source: Datastream
-4
-2
0
2
4
6
8
10
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
USAustralia
Year to % change
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Retail trade was so much stronger here, but has been weak lately
19
Export growth *(volume, %change, 9 months to June quarter 2009)
20
Our exports to China
21
The Labour market is on the mend
Source: ABS
7500
8000
8500
9000
9500
10000
10500
11000
11500
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0000’s %
Employment (LHS)
Unemployment Rate (RHS)
22
Australian Inflation
Source: ABS
-1
0
1
2
3
4
5
6
7
8
9
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Headline CPI Underlying inflation
%
BT Forecasts
GST Effect
23
Interest payments as a share of after-tax household income (%)
24
House Prices - Australia v Sydney
Source: ABS
100
150
200
250
300
350
400
450
500
550
600
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Sydney Australia
Index (1987 = 100)
25
Another look at house prices (in thousands!)
26
Gross Domestic Product
Source: ABS
-3
-2
-1
0
1
2
3
4
5
6
7
8
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Qtly growth Year-to growth Non-farm year-to growth
%
BT Forecasts
GST Effect
27 Source: Consensus Economics
GDP Inflation
Australia 3.3 2.7
United States 2.8 2.2
New Zealand 2.7 2.6
Canada 2.6 2.0
Norway 2.5 2.3
Sweden 2.5 2.0
United Kingdom 2.2 2.4
Netherlands 1.9 1.7
Switzerland 1.9 1.5
France 1.8 1.8
Spain 1.7 1.9
Euro Zone 1.6 1.8
Japan 1.5 0.6
Germany 1.4 1.5
Italy 1.2 1.7
Global Medium-Term Economic Growth and Inflation Prospects (2010-2020)
28
Asia-Pacific Medium-Term Economic Growth and Inflation Prospects (2010-2020)
GDP Consumer Prices
China 8.6 3.4
India 8.0 na
Indonesia 6.0 5.5
Malaysia 5.2 3.1
Philippines 4.9 4.9
Thailand 4.6 3.0
Singapore 4.5 2.1
Taiwan 4.1 1.8
South Korea 4.0 3.0
Hong Kong 4.0 3.0
Australia 3.3 2.7
New Zealand 2.7 2.6
Japan 1.5 0.6
Source: Consensus Economics
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Morgan Stanley Capital Indexes
Source: Datastream
600
900
1200
1500
1800
2100
2400
2700
3000
3300
3600
03 04 05 06 07 08 09 10
100
150
200
250
300
350
400
450
500
550
600Developed Index Asian Emerging Markets Index
Asian Emerging Markets Index (RHS)
World Developed Index (LHS)
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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