Slide 1
Economic and
Investment Markets Update
20th March 2014
Slide 2
This presentation and the associated discussion is general
in nature and does not take your individual situation into
account. You should not act on anything contained
herein, or discussed as a consequence of the contents of
this document, without receiving personal financial
advice from a suitably qualified person such as a
financial advisor.
Slide 3
A look at the global economic environment
&
Australia: the State of the Nation
&
An update on investment markets
Slide 4
Slide 5
The US economy has continued to improve, despite a very cold winter and cuts to government spending
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The start of the Reagan years
The end of Obama’s first term
Slide 8
US Government Debt as a Percentage of US GDP
US Government Debt is projected to reach World War II levels
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How will the US Federal
Reserve manage its
gradual withdrawal of
monetary stimulus?
Slide 10
China is growing quickly, but US economic dominance is expected to last for some time
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Significant growth in US gas and oil production
Slide 12
The cost of a gallon of petrol in US$
Cheap
Expensive
Neither cheap nor expensive
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No change
in 5 years
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Europe’s problems primarily stem from:
• Too much government debt (still)
• Inflexible labour market (compared to the US)
• High energy and labour costs
Slide 15
“Dangerous” level of debt
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Slide 17
China US
Europe
Slide 18
China has been the
primary driver of the
commodities boom
Slide 19
Canada, Brazil, Saudi Arabia
and Australia –key mining investment destinations
for China
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The US, Brazil, and Australia –
key agricultural investment destinations
for China
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The global economy is recovering, but progress is slower than usual
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Overall GDP
Contribution to GDP Growth
Mining investment
Non- Mining investment
Housing
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Housing interest rates
RBA Cash Rate
Slide 26
First home buyers are priced out of the market
Demand is largely from investors and existing homeowners
Loan approvals and housing
credit are improving
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Outside of Sydney and
Melbourne, house price growth is only average
at best
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The ‘GFC’Households
are still focused on
debt reduction and are
reluctant to spend
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A slight improvement in retail sales
growth figures
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Slide 31
Unemployment in an upward trend
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Housing construction Unemployment
Interest rates Mining slowdown
Retail sector China
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US Fed ‘taper’
Emerging market concerns
Russia & the Ukraine
ASX All Ordinaries Index
Slide 34
1987 crash
‘Dot com’ bubble
Pre-GFC peak
Market low –Mar 2009
“The recession we had to have”
Slide 35
ASX All Ordinaries Index
Slide 36
• Australian economic growth will be weak for the next 12 to 18 months (although exports may be high)
• Interest rates steady until late 2014 or early 2015 as housing construction increases pace
• The global economy is improving, but further easing in China will impact Australia (no more ‘ghost cities’ likely to be built)
• Our investment approach remains focused on:- Companies with sound balance sheets and reliable dividends (WOW, WES, TLS)- Conservatively-geared property trusts (BWP, GPT)- Selective exposure to ‘unloved’ cyclicals (TOL, LEI, QBE)
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