james shugg - economic briefing webinar presentation

Australia’s economy shifting gears

December 2012

James Shugg

Senior Economist

Australian growth mix

Consumer* Mining Business Net X GDP-2

-1

0

1

2

3

4

-2

-1

0

1

2

3

4

2012f 2013f 2014f

ppts cont' ppts cont'

Sources: ABS, Westpac Economics

contributions to GDP growthupdated: Nov ’12

* includes housing

2

Date Department Client Job No. Page ‹#›UNCLASSIFIED

When does resource CAPEX start to roll over?

Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-170

5

10

15

20

25

30

Source: Multiple company websites, Westpac Strategy GroupCurrent CAPEX profile "Worst case" CAPEX profile

A$bn/ qtr

A$42bn difference

LNG exports: set to explode

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

0

20

40

60

80

100

120

140

0

20

40

60

80

100

120

140

Floating Qld NT

WA

Mt MtSources: BREE, Westpac Economics

16% 9% 4%

52%

50%

28%11%

10%9%

Lift-offIn 2015

4


Consumer sentiment –long period of weakness

10/01/198811/01/198812/01/198801/01/198902/01/198903/01/198904/01/198905/01/198906/01/198907/01/198908/01/198909/01/198910/01/198911/01/198912/01/198901/01/199002/01/199003/01/199004/01/199005/01/199006/01/199007/01/199008/01/199009/01/199010/01/199011/01/199012/01/199001/01/199102/01/199103/01/199104/01/199105/01/199106/01/199107/01/199108/01/199109/01/199110/01/199111/01/199112/01/199101/01/199202/01/199203/01/199204/01/199205/01/199206/01/199207/01/199208/01/199209/01/199210/01/199211/01/199212/01/199201/01/199302/01/199303/01/199304/01/199305/01/199306/01/199307/01/199308/01/199309/01/199310/01/199311/01/199312/01/199301/01/199402/01/199403/01/199404/01/199405/01/199406/01/199407/01/199408/01/199409/01/199410/01/199411/01/199412/01/199401/01/199502/01/199503/01/199504/01/199505/01/199506/01/199507/01/199508/01/199509/01/199510/01/199511/01/199512/01/199501/01/199602/01/199603/01/199604/01/199605/01/199606/01/199607/01/199608/01/199609/01/199610/01/199611/01/199612/01/199601/01/199702/01/199703/01/199704/01/199705/01/199706/01/199707/01/199708/01/199709/01/199710/01/199711/01/199712/01/199701/01/199802/01/199803/01/199804/01/199805/01/199806/01/199807/01/199808/01/199809/01/199810/01/199811/01/199812/01/199801/01/199902/01/199903/01/199904/01/199905/01/199906/01/199907/01/199908/01/199909/01/199910/01/199911/01/199912/01/199901/01/200002/01/200003/01/200004/01/200005/01/200006/01/200007/01/200008/01/200009/01/200010/01/200011/01/200012/01/200001/01/200102/01/200103/01/200104/01/200105/01/200106/01/200107/01/200108/01/200109/01/200110/01/200111/01/200112/01/200101/01/200202/01/200203/01/200204/01/200205/01/200206/01/200207/01/200208/01/200209/01/200210/01/200211/01/200212/01/200201/01/200302/01/200303/01/200304/01/200305/01/200306/01/200307/01/200308/01/200309/01/200310/01/200311/01/200312/01/200301/01/200402/01/200403/01/200404/01/200405/01/200406/01/200407/01/200408/01/200409/01/200410/01/200411/01/200412/01/200401/01/200502/01/200503/01/200504/01/200505/01/200506/01/200507/01/200508/01/200509/01/200510/01/200511/01/200512/01/200501/01/200602/01/200603/01/200604/01/200605/01/200606/01/200607/01/200608/01/200609/01/200610/01/200611/01/200612/01/200601/01/200702/01/200703/01/200704/01/200705/01/200706/01/200707/01/200708/01/200709/01/200710/01/200711/01/200712/01/200701/01/200802/01/200803/01/200804/01/200805/01/200806/01/200807/01/200808/01/200809/01/200810/01/200811/01/200812/01/200801/01/200902/01/200903/01/200904/01/200905/01/200906/01/200907/01/200908/01/200909/01/200910/01/200911/01/200912/01/200901/01/201002/01/201003/01/201004/01/201005/01/201006/01/201007/01/201008/01/201009/01/201010/01/201011/01/201012/01/201001/01/201102/01/201103/01/201104/01/201105/01/201106/01/201107/01/201108/01/201109/01/201110/01/201111/01/201112/01/201101/01/201202/01/201203/01/201204/01/201205/01/201206/01/201207/01/201208/01/201209/01/201210/01/201211/01/201212/01/201260

70

80

90

100

110

120

130

60

70

80

90

100

110

120

130 indexindex

Sources: Melbourne Insti-tute, Westpac Economics

long run average

periods with 4 or more consecutive sub-100 reads

months: 57 4 16 4 8

5


Consumer sentiment: housing improves

Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13-80

-60

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0

20

40

60

80

100

0

5

10

15

20

25

30

35

40

45

'time to buy a dwelling'*

house price expectations^

index %

Sources: Melbourne Institute, Morgage Choice, Westpac Economics

*seasonally adjusted, deviation from long run avg; ^net % expecting prices to rise

6


Auction clearance rates recover

Apr-93May-93Jun-93Jul-93Aug-93Sep-93Oct-93Nov-93Dec-93Jan-94Feb-94Mar-94Apr-94May-94Jun-94Jul-94Aug-94Sep-94Oct-94Nov-94Dec-94Jan-95Feb-95Mar-95Apr-95May-95Jun-95Jul-95Aug-95Sep-95Oct-95Nov-95Dec-95Jan-96Feb-96Mar-96Apr-96May-96Jun-96Jul-96Aug-96Sep-96Oct-96Nov-96Dec-96Jan-97Feb-97Mar-97Apr-97May-97Jun-97Jul-97Aug-97Sep-97Oct-97Nov-97Dec-97Jan-98Feb-98Mar-98Apr-98May-98Jun-98Jul-98Aug-98Sep-98Oct-98Nov-98Dec-98Jan-99Feb-99Mar-99Apr-99May-99Jun-99Jul-99Aug-99Sep-99Oct-99Nov-99Dec-99Jan-00Feb-00Mar-00Apr-00May-00Jun-00Jul-00Aug-00Sep-00Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13May-13-3

-2

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0

1

2

3

-3

-2

-1

0

1

2

3Sydney (14%) Melbourne (20%) Brisbane (2.5%)

st. devns st. devns

Sources: RP Data-Rismark, Westpac Economics

*seas. adjusted by Westpac, smoothed, std. devns from long run average; figures show avg proportion of properties sold via auction (i.e. vs private treaty)

7


Annual jobs growth by sector to Sept. qtr

ConstructionGovernment

RetailWholesale & trans

Leisure & hospitalityManufacturing

FinanceReal Estate

Other business servicesProf & technical

Mining, ag & utiltiesEducation & health

-80 -60 -40 -20 0 20 40 60 80 100

Sep-12

‘000 change in employment

Sources: ABS, West-pac Economics

8


Including bonuses, wage rates have pulled back

Sep-00

Dec-00

Mar-01

Jun-01

Sep-01

Dec-01

Mar-02

Jun-02

Sep-02

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

2

3

4

5

2

3

4

5

Private sector WPI (ex bonuses)

Private sector WPI including bonuses, nsa

%yr %yr


9


Private WPI; WA is main source of pressure

Sep-02

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

1

2

3

4

5

6

7

1

2

3

4

5

6

7

Vic WA NSWQld

% ann % ann

Sources: ABS, Westpac Economicsnsa

10


Job ads suggest employment growth to slow

Oct-87 Oct-92 Oct-97 Oct-02 Oct-07 Oct-12-80

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80

-5

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1

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5

Total job ads trend - adv 7mths (lhs)Employment trend (rhs)

%yr %yrSources: ABS, ANZ, Westpac Economics

Total ads derived prior to Jul-99 by applying %mth growth rates of newspaper ads

11


Unemployment likely to move higher

Nov-87Dec-87Jan-88Feb-88Mar-88Apr-88May-88Jun-88Jul-88Aug-88Sep-88Oct-88Nov-88Dec-88Jan-89Feb-89Mar-89Apr-89May-89Jun-89Jul-89Aug-89Sep-89Oct-89Nov-89Dec-89Jan-90Feb-90Mar-90Apr-90May-90Jun-90Jul-90Aug-90Sep-90Oct-90Nov-90Dec-90Jan-91Feb-91Mar-91Apr-91May-91Jun-91Jul-91Aug-91Sep-91Oct-91Nov-91Dec-91Jan-92Feb-92Mar-92Apr-92May-92Jun-92Jul-92Aug-92Sep-92Oct-92Nov-92Dec-92Jan-93Feb-93Mar-93Apr-93May-93Jun-93Jul-93Aug-93Sep-93Oct-93Nov-93Dec-93Jan-94Feb-94Mar-94Apr-94May-94Jun-94Jul-94Aug-94Sep-94Oct-94Nov-94Dec-94Jan-95Feb-95Mar-95Apr-95May-95Jun-95Jul-95Aug-95Sep-95Oct-95Nov-95Dec-95Jan-96Feb-96Mar-96Apr-96May-96Jun-96Jul-96Aug-96Sep-96Oct-96Nov-96Dec-96Jan-97Feb-97Mar-97Apr-97May-97Jun-97Jul-97Aug-97Sep-97Oct-97Nov-97Dec-97Jan-98Feb-98Mar-98Apr-98May-98Jun-98Jul-98Aug-98Sep-98Oct-98Nov-98Dec-98Jan-99Feb-99Mar-99Apr-99May-99Jun-99Jul-99Aug-99Sep-99Oct-99Nov-99Dec-99Jan-00Feb-00Mar-00Apr-00May-00Jun-00Jul-00Aug-00Sep-00Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13-200

-100

0

100

200

300

400

80

100

120

140

160

180

200annual change in unemployment rate smoothed (lhs)unemployment expectations trend (rhs)

indexbps

Sources: Westpac-MI

unemployment rising

unemployment falling

12


Interest rate forecasts

0

2

4

6

8

10

12

0

2

4

6

8

10

12standard variable mortgage ratecash rateSeries5

% %

Sources: RBA, Westpac

f'cast

10yr avg

13


Oct-01Nov-01Nov-01Dec-01Dec-01Jan-02Jan-02Feb-02Feb-02Mar-02Mar-02Mar-02Apr-02Apr-02May-02May-02Jun-02Jun-02Jul-02Jul-02Aug-02Aug-02Aug-02Sep-02Sep-02Oct-02Oct-02Nov-02Nov-02Dec-02Dec-02Jan-03Jan-03Jan-03Feb-03Feb-03Mar-03Mar-03Apr-03Apr-03May-03May-03Jun-03Jun-03Jul-03Jul-03Aug-03Aug-03Aug-03Sep-03Sep-03Oct-03Oct-03Nov-03Nov-03Dec-03Dec-03Jan-04Jan-04Jan-04Feb-04Feb-04Mar-04Mar-04Apr-04Apr-04May-04May-04Jun-04Jun-04Jul-04Jul-04Jul-04Aug-04Aug-04Sep-04Sep-04Oct-04Oct-04Nov-04Nov-04Dec-04Dec-04Dec-04Jan-05Jan-05Feb-05Feb-05Mar-05Mar-05Apr-05Apr-05May-05May-05Jun-05Jun-05Jul-05Jul-05Jul-05Aug-05Aug-05Sep-05Sep-05Oct-05Oct-05Nov-05Nov-05Dec-05Dec-05Dec-05Jan-06Jan-06Feb-06Feb-06Mar-06Mar-06Apr-06Apr-06May-06May-06Jun-06Jun-06Jun-06Jul-06Jul-06Aug-06Aug-06Sep-06Sep-06Oct-06Oct-06Nov-06Nov-06Dec-06Dec-06Dec-06Jan-07Jan-07Feb-07Feb-07Mar-07Mar-07Apr-07Apr-07May-07May-07Jun-07Jun-07Jun-07Jul-07Jul-07Aug-07Aug-07Sep-07Sep-07Oct-07Oct-07Nov-07Nov-07Nov-07Dec-07Dec-07Jan-08Jan-08Feb-08Feb-08Mar-08Mar-08Apr-08Apr-08May-08May-08Jun-08Jun-08Jun-08Jul-08Jul-08Aug-08Aug-08Sep-08Sep-08Oct-08Oct-08Oct-08Nov-08Nov-08Dec-08Dec-08Jan-09Jan-09Feb-09Feb-09Mar-09Mar-09Apr-09Apr-09May-09May-09May-09Jun-09Jun-09Jul-09Jul-09Aug-09Aug-09Sep-09Sep-09Oct-09Oct-09Oct-09Nov-09Nov-09Dec-09Dec-09Jan-10Jan-10Feb-10Feb-10Mar-10Mar-10Apr-10Apr-10Apr-10May-10May-10Jun-10Jun-10Jul-10Jul-10Aug-10Aug-10Sep-10Sep-10Sep-10Oct-10Oct-10Nov-10Nov-10Dec-10Dec-10Jan-11Jan-11Feb-11Feb-11Mar-11Mar-11Apr-11Apr-11Apr-11May-11May-11Jun-11Jun-11Jul-11Jul-11Aug-11Aug-11Sep-11Sep-11Sep-11Oct-11Oct-11Nov-11Nov-11Dec-11Dec-11Jan-12Jan-12Feb-12Feb-12Mar-12Mar-12Mar-12Apr-12Apr-12May-12May-12Jun-12Jun-12Jul-12Jul-12Aug-12Aug-12Aug-12Sep-12Sep-12Oct-12Oct-12Nov-12Nov-12Dec-12Dec-12Jan-13Jan-13Feb-13Feb-13Mar-13Mar-13Mar-13Apr-13Apr-13May-13May-13Jun-13Jun-13Jul-13Jul-13Aug-13Aug-13Aug-13Sep-13Sep-13Oct-13Oct-13Nov-13Nov-13Dec-13Dec-13Jan-14Jan-14Jan-14Feb-14Feb-14Mar-14Mar-14Apr-14Apr-14May-14May-14Jun-14Jun-14Jul-14Jul-14Aug-14Aug-14Aug-14Sep-14Sep-14Oct-14Oct-14Nov-14Nov-14Dec-14Dec-14Jan-15Jan-15Jan-15Feb-15Feb-15Mar-15Mar-15Apr-15Apr-15May-15May-15Jun-15Jun-15Jul-15Jul-15Jul-15Aug-15Aug-15Sep-15Sep-15Oct-15Oct-15Nov-15Nov-15Dec-15Dec-15Jan-16Jan-16Jan-16Feb-16Feb-16Mar-16Mar-16Apr-16Apr-16May-16May-16Jun-16Jun-16Jul-16Jul-16Jul-16Aug-16Aug-16Sep-16Sep-16Oct-16Oct-16Nov-16Nov-16Dec-16Dec-16Dec-162

3

4

5

6

7

8

9

2

3

4

5

6

7

8

9

Cash rate

implied by mkt forecast

% %Sources: RBA, Factset, Westpac Economics

weekly average

updated Oct 2012

Market expects rates at record low for years

14


World growth – Asia supports recovery in 2013

2009 2010 2011 2012f 2013f

World –0.6 5.3 3.9 2.9 3.6

US –3.5 3.0 1.8 2.2 1.8

Euro –4.2 1.8 1.5 –0.6 –0.4

Japan –5.5 4.8 –0.7 2.4 1.5

China 9.6 10.4 9.3 7.8 8.7

India 6.4 8.9 7.5 5.6 7.4

Other Asia 0.5 7.8 4.2 3.6 4.8

Australia 1.4 2.5 2.1 3.5 3.2

15


Terms of trade & TWI

Jun-80Sep-80Dec-80Mar-81Jun-81Sep-81Dec-81Mar-82Jun-82Sep-82Dec-82Mar-83Jun-83Sep-83Dec-83Mar-84Jun-84Sep-84Dec-84Mar-85Jun-85Sep-85Dec-85Mar-86Jun-86Sep-86Dec-86Mar-87Jun-87Sep-87Dec-87Mar-88Jun-88Sep-88Dec-88Mar-89Jun-89Sep-89Dec-89Mar-90Jun-90Sep-90Dec-90Mar-91Jun-91Sep-91Dec-91Mar-92Jun-92Sep-92Dec-92Mar-93Jun-93Sep-93Dec-93Mar-94Jun-94Sep-94Dec-94Mar-95Jun-95Sep-95Dec-95Mar-96Jun-96Sep-96Dec-96Mar-97Jun-97Sep-97Dec-97Mar-98Jun-98Sep-98Dec-98Mar-99Jun-99Sep-99Dec-99Mar-00Jun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12Jun-12Sep-12Dec-12Mar-13Jun-13Sep-13Dec-1380

100

120

140

160

180

30

50

70

90

110

130

150

Real TWI (lhs) Terms of trade (rhs)

index indexSources: ABS, RBA, Westpac Economics

16


The Australian dollar now overvalued

Jan-91Feb-91Mar-91Apr-91May-91Jun-91Jul-91Aug-91Sep-91Oct-91Nov-91Dec-91Jan-92Feb-92Mar-92Apr-92May-92Jun-92Jul-92Aug-92Sep-92Oct-92Nov-92Dec-92Jan-93Feb-93Mar-93Apr-93May-93Jun-93Jul-93Aug-93Sep-93Oct-93Nov-93Dec-93Jan-94Feb-94Mar-94Apr-94May-94Jun-94Jul-94Aug-94Sep-94Oct-94Nov-94Dec-94Jan-95Feb-95Mar-95Apr-95May-95Jun-95Jul-95Aug-95Sep-95Oct-95Nov-95Dec-95Jan-96Feb-96Mar-96Apr-96May-96Jun-96Jul-96Aug-96Sep-96Oct-96Nov-96Dec-96Jan-97Feb-97Mar-97Apr-97May-97Jun-97Jul-97Aug-97Sep-97Oct-97Nov-97Dec-97Jan-98Feb-98Mar-98Apr-98May-98Jun-98Jul-98Aug-98Sep-98Oct-98Nov-98Dec-98Jan-99Feb-99Mar-99Apr-99May-99Jun-99Jul-99Aug-99Sep-99Oct-99Nov-99Dec-99Jan-00Feb-00Mar-00Apr-00May-00Jun-00Jul-00Aug-00Sep-00Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13May-13Jun-13Jul-13Aug-13Sep-13Oct-13Nov-13Dec-130.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

AUD/USD actual

Model estimate

USD USDSource: Westpac Economics.

Includes coal, exchanged traded commodities, relative yield curve, a risk proxy and net foreign debt to GDP.

17


Conclusions

• Headwinds on Australia include fiscal; AUD; rates 65 bp’s below neutral.

• RBA plan – fill mining gap without inflation – scope to succeed.

• Sydney house prices look attractive

• AUD and commodities to strengthen in 2013.H1.

• US and ECB QE to help AUD and commodities.

• Case for more rate cuts still strong.

18

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update the information or correct any inaccuracy which may become apparent at a later date. Past performance is not a reliable indicator of future performance. The forecasts given in this document

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DisclaimerDisclaimerDate Department Client Job No. Page ‹#›UNCLASSIFIED

Investor housing yields vs mortgage rates

03/01/1993

06/01/1993

09/01/1993

12/01/1993

03/01/1994

06/01/1994

09/01/1994

12/01/1994

03/01/1995

06/01/1995

09/01/1995

12/01/1995

03/01/1996

06/01/1996

09/01/1996

12/01/1996

03/01/1997

06/01/1997

09/01/1997

12/01/1997

03/01/1998

06/01/1998

09/01/1998

12/01/1998

03/01/1999

06/01/1999

09/01/1999

12/01/1999

03/01/2000

06/01/2000

09/01/2000

12/01/2000

03/01/2001

06/01/2001

09/01/2001

12/01/2001

03/01/2002

06/01/2002

09/01/2002

12/01/2002

03/01/2003

06/01/2003

09/01/2003

12/01/2003

03/01/2004

06/01/2004

09/01/2004

12/01/2004

03/01/2005

06/01/2005

09/01/2005

12/01/2005

03/01/2006

06/01/2006

09/01/2006

12/01/2006

03/01/2007

06/01/2007

09/01/2007

12/01/2007

03/01/2008

06/01/2008

09/01/2008

12/01/2008

03/01/2009

06/01/2009

09/01/2009

12/01/2009

03/01/2010

06/01/2010

09/01/2010

12/01/2010

03/01/2011

06/01/2011

09/01/2011

12/01/2011

03/01/2012

06/01/2012

09/01/2012

12/01/2012

03/01/2013

06/01/2013

09/01/2013

12/01/2013

3

4

5

6

7

8

9

10

11

12

3

4

5

6

7

8

9

10

11

12Series2

Sydney

%pa%pa

Sources: REIA, Westpac Economics

*median rent on 2bdrm unit as % of median unit price

investorhousing

boom

variable mort-gage rate

3yr fixed rate

20


Dwelling prices: Sydney vs Melbourne

Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13May-13Jun-1360

80

100

120

140

160

180

200

60

80

100

120

140

160

180

200Sydney Melbourne

index index


*all dwellings, Dec 2002 = 100

+30%

+78%

21


Auction clearance rates recover

Apr-93May-93Jun-93Jul-93Aug-93Sep-93Oct-93Nov-93Dec-93Jan-94Feb-94Mar-94Apr-94May-94Jun-94Jul-94Aug-94Sep-94Oct-94Nov-94Dec-94Jan-95Feb-95Mar-95Apr-95May-95Jun-95Jul-95Aug-95Sep-95Oct-95Nov-95Dec-95Jan-96Feb-96Mar-96Apr-96May-96Jun-96Jul-96Aug-96Sep-96Oct-96Nov-96Dec-96Jan-97Feb-97Mar-97Apr-97May-97Jun-97Jul-97Aug-97Sep-97Oct-97Nov-97Dec-97Jan-98Feb-98Mar-98Apr-98May-98Jun-98Jul-98Aug-98Sep-98Oct-98Nov-98Dec-98Jan-99Feb-99Mar-99Apr-99May-99Jun-99Jul-99Aug-99Sep-99Oct-99Nov-99Dec-99Jan-00Feb-00Mar-00Apr-00May-00Jun-00Jul-00Aug-00Sep-00Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13May-13-3

-2

-1

0

1

2

3

-3

-2

-1

0

1

2

3Sydney (14%) Melbourne (20%) Brisbane (2.5%)

st. devns st. devns


*seas. adjusted by Westpac, smoothed, std. devns from long run average; figures show avg proportion of properties sold via auction (i.e. vs private treaty)

22


Westpac mortgage arrears – QLD is risky

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

0.0

0.2

0.4

0.6

0.8

1.0

1.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

NSW/ACT

VIC/TAS

QLD

WA

% %

Sources: Westpac Economics

* 90+ day delinquencies

23


Residential real estate listings – QLD oversupply

capitals Syd Melb Bris current 2007-080

2

4

6

8

10

12

14

16

0

2

4

6

8

10

12

14

16months' of supply*

%%

Sources: RP Data, ABS, NAR, US Census Bureau, CoreLogic, Westpac Economics

Australia US

* at current sales pace

long run avg

including estimated ‘shadow inventory’ of prop-erties still in foreclosure process

24


Dwelling completions: NSW vs Vic

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

0

5

10

15

20

25

0

5

10

15

20

25NSW Vic

% %


*total completions since Dec 2002, % of stock

13%

22%

25


New dwelling construction –Vic. looks very heavy

Jun-05 Jun-0950

70

90

110

130

150

NSW Vic Tas

indexSources: ABS, Westpac Economics

Jun-05 Jun-0950

70

90

110

130

150

WA Qld SA

indexMar ’08 = 100

26


Tas SA Vic NSW Qld WA Aus0

1

2

3

4

5

6

7

0.1

1.0

1.9 2.0

1.4

4.3

2.1

0.2

2.32.7 2.6

1.0

4.0

2.4

0.5

2.1 2.3 2.4

4.0

6.7

3.4

2009/10 2010/11 2011/12

% chgSources: ABS, Westpac Economics

Economic growth: state by stateDate Department Client Job No. Page ‹#›UNCLASSIFIED

Business investment: by state

Jun-91 Jun-99 Jun-070

4

8

12

16

20

NSW + Vic

WA + Qld

$bn Equipment

’03/04 to ’07/08


4

8

12

16

20

NSW + Vic

WA + Qld

$bnConstruction



Domestic demand: state view

Jun-96 Jun-02 Jun-08-6

-3

0

3

6

9

12

NSW Vic

% annSources: ABS, Westpac Economics 2qtr avg

Jun-96 Jun-02 Jun-08-9

-6

-3

0

3

6

9

12

15

18

WA Qld

% ann


Consumer spend: diverge

Jun-92

Sep-92

Dec-92

Mar-93

Jun-93

Sep-93

Dec-93

Mar-94

Jun-94

Sep-94

Dec-94

Mar-95

Jun-95

Sep-95

Dec-95

Mar-96

Jun-96

Sep-96

Dec-96

Mar-97

Jun-97

Sep-97

Dec-97

Mar-98

Jun-98

Sep-98

Dec-98

Mar-99

Jun-99

Sep-99

Dec-99

Mar-00

Jun-00

Sep-00

Dec-00

Mar-01

Jun-01

Sep-01

Dec-01

Mar-02

Jun-02

Sep-02

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

-2

0

2

4

6

8

10

12

-2

0

2

4

6

8

10

12

South East * Qld, WA, NT

% ann % ann


latest 6mths(annualised)

* NSW, Vic, SA, Tas, ACT


Established house prices stabilise

Jun-00 Jun-08-20

-10

0

10

20

30

40

50

Sydney

Melbourne

% ann


Jun-00 Jun-08-20

-10

0

10

20

30

40

50

Brisbane

Perth

% ann


Employment by state

Aug-07 Aug-10-4

-2

0

2

4

6

8NSW Vic

% chg


6mth, annualised* smoothed

Aug-07 Aug-10-4

-2

0

2

4

6

8Qld WA

% chg


Non-residential construction pipeline


2

4

6

8

10

South-east

Qld, WA, NT

$bn Non-res. building

Approvals qtrly

Public worksboost

Mar-91 Mar-99 Mar-070

20

40

60

80

100

120

140

South-east

Qld, WA, NT

$bnInfrastructure

Work Yet to be Done



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