A Global Economic and Market Outlook February 2013 Presented by Dr Chris Caton
Dec 26, 2014
A Global Economic and Market Outlook
February 2013
Presented by Dr Chris Caton
Euro-area government bond spreads (to German bonds)
2
The two that matter have clearly improved (long-term bond yields (%))
3
4
2013 Growth Forecasts (%)
Month of Forecast
M-12 A-12 M-12 J-12 J-12 A-12 S-12 O-12 N-12 D-12 J-13
Australia 3.1 3.1 3.4 3.2 3.1 3.1 2.9 2.9 2.8 2.7 2.6
New Zealand
3.2 3.1 3.0 3.0 2.9 2.8 2.8 2.7 2.6 2.6 2.5
US 2.6 2.5 2.5 2.4 2.3 2.1 2.1 2.0 1.9 1.9 2.0
Japan 1.5 1.5 1.5 1.3 1.4 1.4 1.3 1.3 0.8 0.6 0.7
China 8.6 8.5 8.5 8.4 8.4 8.3 8.1 8.1 8.1 8.1 8.1
Germany 1.5 1.6 1.6 1.4 1.3 1.2 1.0 0.9 0.8 0.7 0.7
UK 1.8 1.8 1.8 1.8 1.6 1.4 1.3 1.2 1.3 1.1 1.0
“World” 3.2 3.1 3.1 3.0 2.9 2.9 2.8 2.8 2.7 2.6 2.6 Source: Consensus Economics
5
Real GDP growth in Australia and the US
Source: Datastream
-5
-2.5
0
2.5
5
7.5
10
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
USAustralia
Year to % change
Australia’s Terms of trade (Index 1900-01 to 1999-00 = 100)
Source: ABS Catalogue Number 5206.0, RBA and Treasury.
60
80
100
120
140
160
180
200
60
80
100
120
140
160
180
200
1869-70 1894-95 1919-20 1944-45 1969-70 1994-95 2019-20
Index Index
Budget forecasts/ projections
5 - year centred moving average
Have iron ore prices got ahead of themselves?
7
8
The Labour market is close to static
Source: ABS
8500
9000
9500
10000
10500
11000
11500
12000
00 01 02 03 04 05 06 07 08 09 10 11 12 134.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5000’s %
Employment (LHS)
Unemployment Rate (RHS)
Contributions to jobs growth (year to November 2012, thousands)
9
10
Australian Inflation
Source: ABS
0
1
2
3
4
5
6
7
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Headline CPI Underlying inflation
%
BT Forecasts
GST Effect
Interest rate changes do make a difference!
11
House Prices - Australia v Canberra
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 11 12
Canberra AustraliaIndex (1987 = 100)
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 11 12
Sydney AustraliaIndex (1987 = 100)
We are very expensive compared with the United States
14
But not otherwise!
15
Prices have fallen everywhere but they may be turning
16
17
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 12 13 14
Qtly growth Year-to growth Non-farm year-to growth
%
BT Forecasts
GST Effect
18
Mining investment will peak soon
19
Financial Market Forecasts
Now (1 Feb)
End-Jun 2013
End-Dec 2013
AUD/USD 1.042 1.00 0.95
Official cash rate (%) 3.00 2.75 2.75
10 Year Bond yield (%) 3.50
3.60 3.75
ASX 200 4878
5000 5200
20
The Australian Dollar and US Trade Weighted Index
Source: Datastream
64
84
103
122
142
161
180
99 00 01 02 03 04 05 06 07 08 09 10 11 12 130.40
0.52
0.64
0.76
0.88
1.00
1.12Index AUD/USD
US TWI inverted (LHS)
AUD/USD (RHS)
21
Australian dollar against Asian share markets
Source: Datastream
0.6
0.7
0.8
0.9
1
1.1
1.2
08 09 10 11 12 13175
245
315
385
455
525
595$A Asian Emerging Markets Index
Asian Emerging Markets Index (RHS)
$A (LHS)
22
Australian Sharemarket Performance – ASX200
Source: Bloomberg
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 12 13
The Australian market is not nearly as cheap as it was (p/e ratio)
23
The current state of the US economy does make a difference to markets
24
The current recovery compared with previous “big ugly bears”
25
26 Source: Consensus Economics
GDP Inflation Australia 3.0 2.6 Norway 2.7 1.9 New Zealand 2.6 2.3 United States 2.5 2.3 Sweden 2.2 1.7 Canada 2.1 2.0 United Kingdom 1.8 2.8 Netherlands 1.6 2.2 Switzerland 1.6 1.1 Spain 1.6 2.1 France 1.4 1.9 Germany 1.4 2.1 Eurozone 1.1 2.0 Japan 1.1 0.7 Italy 0.5 2.1
Global Medium-Term Economic Growth and Inflation Prospects (2012-2022)
27
Asia-Pacific Medium-Term Economic Growth and Inflation Prospects (2012-2022)
GDP Consumer Prices
India 7.2 5.9 China 7.1 3.0 Indonesia 6.1 5.7 Philippines 5.2 4.4 Malaysia 4.8 2.3 Thailand 4.4 3.0 Singapore 4.0 2.7 Taiwan 3.4 2.1 South Korea 3.4 2.7 Hong Kong 3.3 3.1 Australia 3.0 2.6 New Zealand 2.6 2.3 Japan 1.1 0.9
Source: Consensus Economics
28
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 11 12 13100
150
200
250
300
350
400
450
500
550
600Developed Index Asian Emerging Markets Index
Asian Emerging Markets Index (RHS)
World Developed Index (LHS)
29
Summary
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.
Fiscal cliff issues have been delayed for a few months.
The Australian economy should continue to experience moderate but unbalanced growth, led by mining investment. The mining boom will, of course, end eventually.
The cash rate is likely to fall again.
The exchange rate is above fair value. The rest of the world is still on sale for Australians.
Share markets are still slightly cheap.
30
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