Craig James, Chief Economist, CommSec

May 2014

This presentation has been prepared without taking account of the objectives, financial

situation or needs of any particular individual. Before acting on the information in this

seminar, you should consider its appropriateness to your circumstances and, if

necessary, seek appropriate professional advice.

Commonwealth Securities Limited ABN 60 067 254 399

AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of

Commonwealth Bank of Australia ABN 48 123 123 124 and a Participant of the ASX

Group.

Examples used in this presentation are for illustrative purposes only.

The Big Economic Issues

� US ‘taper’: Smooth or bumpy?

� China: High road or low road?

� Australia: The ‘Baton-pass’

� Budget: Road to Surplus

� Housing: Boom or bubble?

� Aussie dollar: too high?

� Interest rates: When to move?

US taper: Smooth or bumpy?

China: High/low road? Biggest contributor to world growth

Slowdown – reasons to worry?

Australia

22 Consecutive years of

economic growth

2.7%Underlying

Inflation

rate

5.8% Unemployment

rate

+

=

Reasons for optimism

Baton pass: Mining to Housing

State of the States

Bubble trouble?

HOME PRICES

April 2014 6.7%

1.2%

11.6%

4.3%

3.8%

7.7%

4.7%

16.7%

Annual % change

Source: RP Data/Rismark, CommSec

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Supply & demand

Changing times

US75c,

2004-06

US84c,

2007-09

US100c,

2010-12

US92-95c,

Now

More “normal” returns expected as

economy consolidates

Sharemarket

…”interest rates are likely to

be lower in such a world than

they were in a world in which

households were extending

their finances.”

ECONOMY: Returning to normal…3.0%

INFLATION: In Band…2-3%

UNEMPLOYMENT: Still low…5.75-6.25%

HOME PRICES: Growth between 5-7%

INTEREST RATES: Range 2.25-2.75% in 2014

SHAREMARKET: ASX 200 5,700-5,800pts (Dec 14)

AUSSIE DOLLAR: US97c (Dec 14)