James Shugg  - Economic Briefing Webinar Presentation
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James Shugg - Economic Briefing Webinar Presentation

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James Shugg, senior economist at Westpac Bank joined UKTI for a briefing webinar on the Australian economy.

James Shugg, senior economist at Westpac Bank joined UKTI for a briefing webinar on the Australian economy.

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James Shugg  - Economic Briefing Webinar Presentation James Shugg - Economic Briefing Webinar Presentation Presentation Transcript

  • Australia’s economyshifting gearsDecember 2012James ShuggSenior Economist
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Australian growth mix ppts cont contributions to GDP growth ppts cont 4 updated: Nov ‟12 4 3 3 2012f 2013f 2014f 2 2 1 1 0 0 -1 -1 * includes housing Sources: ABS, Westpac Economics -2 -2 Consumer* Mining Business Net X GDP 2
  • When does resource CAPEX start to roll over? A$bn/ qtr 30 25 A$42bn difference 20 15 10 5 0 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Current CAPEX profile "Worst case" CAPEX profile Source: Multiple company websites, Westpac Strategy Group
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED LNG exports: set to explode Mt Mt140 Sources: BREE, Westpac Economics 140 Floating120 Qld 120 NT 9%100 10% 100 WA 11% Lift-off 28% 80 80 In 2015 50% 60 60 52% 40 4% 40 16% 9% 20 20 0 0 2010 2012 2014 2016 2018 2020 2022 2024 4
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Consumer sentiment –long period of weakness index index130 130 months: 57 4 16 4 8120 120110 110100 100 long run average 90 90 periods with 4 80 or more 80 consecutive sub-100 reads 70 Sources: Melbourne 70 Institute, Westpac 60 60 Oct-88 Oct-92 Oct-96 Oct-00 Oct-04 Oct-08 Oct-12 5
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Consumer sentiment: housing improves index %100 45 80 time to buy a dwelling* 40 60 house price expectations^ 35 40 30 20 25 0 20 -20 15 -40 10 -60 *seasonally adjusted, deviation from long Sources: Melbourne 5 run avg; ^net % expecting prices to rise Institute, Morgage Choice, Westpac -80 0 Oct-00 Oct-02 Oct-04 Oct-06 Oct-08 Oct-10 Oct-12 6
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Auction clearance rates recover st. devns st. devns 3 Sydney (14%) Melbourne (20%) Brisbane (2.5%) 3 2 2 1 1 0 0 -1 -1 -2 *seas. adjusted by Westpac, smoothed, std. devns -2 from long run average; figures show avg proportion Sources: RP of properties sold via auction (i.e. vs private treaty) Data-Rismark, Westpac -3 -3 Apr-93 Apr-98 Apr-03 Apr-08 Apr-13 7
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Annual jobs growth by sector to Sept. qtr Education & health Mining, ag & utilties Prof & technical Other business services Real Estate Finance Sep-12 Manufacturing Leisure & hospitality Wholesale & trans Retail Government Sources: ABS, Westpac Construction -100 -50 0 50 100 „000 change in employment 8
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Including bonuses, wage rates have pulled back %yr %yr 5 5 4 4 3 3 Private sector WPI (ex bonuses) Private sector WPI including bonuses, nsa Sources: ABS, Westpac Economics 2 2 Sep-00 Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12 9
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Private WPI; WA is main source of pressure % ann % ann 7 7 6 6 5 5 4 4 3 3 Vic WA NSW Qld 2 2 Sources: ABS, Westpac Economics nsa 1 1 Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12 10
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Job ads suggest employment growth to slow %yr %yr 80 Sources: ABS, ANZ, Westpac Economics 5 60 4 3 40 2 20 1 0 0 -20 -1 -2 -40 Total ads derived prior to Jul-99 by -3 -60 Total job ads trend - adv 7mths (lhs) applying %mth growth rates of newspaper ads -4 Employment trend (rhs) -80 -5 Oct-87 Oct-92 Oct-97 Oct-02 Oct-07 Oct-12 11
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Unemployment likely to move higher bps index 200400 annual change in unemployment rate smoothed (lhs) unemployment expectations trend (rhs) 180300 160200 unemployment 140100 rising 0 120-100 100 unemployment falling Sources: Westpac-MI-200 80 Nov-87 Nov-92 Nov-97 Nov-02 Nov-07 Nov-12 12
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Interest rate forecasts % % 12 12 standard variable mortgage rate fcast 10 cash rate 10 10yr avg 8 8 6 6 4 4 2 2 Sources: RBA, Westpac 0 0 Dec-95Dec-97Dec-99Dec-01Dec-03Dec-05Dec-07Dec-09Dec-11 13
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Market expects rates at record low for years % % 9 weekly average 9 Sources: RBA, Factset, Westpac Economics updated Oct 2012 8 8 7 7 6 6 5 5 4 4 Cash rate 3 implied by mkt forecast 3 2 2 Oct-01 Oct-03 Oct-05 Oct-07 Oct-09 Oct-11 Oct-13 Oct-15 14
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED 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
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Terms of trade & TWI index index180 150 Sources: ABS, RBA, Westpac Economics 130160 Real TWI (lhs) Terms of trade (rhs) 110140 90120 70100 50 80 30 Jun-80 Jun-85 Jun-90 Jun-95 Jun-00 Jun-05 Jun-10 16
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED The Australian dollar now overvalued USD USD1.20 1.20 Source: Westpac Economics.1.10 1.10 AUD/USD actual1.00 1.00 Model estimate0.90 0.900.80 0.800.70 0.700.60 0.600.50 0.50 Includes coal, exchanged traded commodities, relative yield curve, a risk proxy and net foreign debt to GDP.0.40 0.40 Jan-91 Jan-95 Jan-99 Jan-03 Jan-07 Jan-11 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
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Disclaimer Disclaimer Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 („Westpac‟). This document is provided to you solely for your own use and in your capacity as a wholesale client of Westpac. The information contained in this communication does not constitute an offer, or a solicitation of an offer, to subscribe for or purchase any securities or other financial instrument; does not constitute an offer, inducement or solicitation to enter a legally binding contract. The information is general and preliminary market information only and while Westpac has made every effort to ensure that information is free from error, Westpac does not warrant the accuracy, adequacy or completeness of the Information. The information may contain material provided directly by third parties and while such material is published with necessary permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure the information is from error, Westpac does not warrant the accuracy, adequacy or completeness of the information, or otherwise endorse it in any way. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to 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 are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts. This communication does not constitute a personal recommendation to any individual investor. In preparing the information, Westpac has not taken into consideration the financial situation, investment objectives or particular needs of any particular investor and recommends that investors seek independent advice before acting on the information. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice. A product disclosure statement (“PDS”) may be available for the products referred to in this document. A copy of the relevant PDS and a copy of Westpac‟s Financial Services Guide can be obtained by visiting www.westpac.com.au/disclosure-documents. You should obtain and consider the relevant PDS before deciding whether to acquire, continue to hold or dispose of the applicable products referred to in this document. This document is being distributed by Westpac Banking Corporation London Branch and Westpac Europe Limited only to and is directed at a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services Act 2000 (Financial Promotion) Order 2005 or (b) high net worth entities, and other persons to whom it may otherwise be lawfully be communicated, falling within Article 49(1) of the Order (all such persons together being referred to as “relevant persons”). The investments to which this document relates are only available to and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such investments will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely upon this document or any of its contents. In the same way, the information contained in this document is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Services Authority and is not intended for “retail clients”. With this in mind, Westpac expressly prohibits you from passing on this document to any third party. In particular this presentation and any copy of it may not be taken, transmitted or distributed, directly or indirectly into the United States and any other restricted jurisdiction. This document has been approved solely for the purposes of section 21 of the Financial Services and Markets Act 2000 by Westpac Banking Corporation London Branch and Westpac Europe Limited. Westpac Banking Corporation is registered in England as a branch (branch number BR000106) and is authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. Westpac operates in the United States of America as a federally chartered branch, regulated by the Office of the Controller of the Currency and is not affiliated with either: (i) a broker dealer registered with the US Securities Exchange Commission; or (ii) a Futures Commission Merchant registered with the US Commodity Futures Trading Commission. If you wish to be removed from our e-mail, fax or mailing list please send an e-mail to economics@westpac.com.au or fax us on +61 2 8254 6907 or write to Westpac Economics at Level 2, 275 Kent Street, Sydney NSW 2000. Please state your full name, telephone/fax number and company details on all correspondence. © 2012 Westpac Banking Corporation.or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Investor housing yields vs mortgage rates %pa %pa 12 12 variable investor Sydney *median rent on 11 mortgage rate housing 2bdrm unit as % 11 boom Melbourne of median unit 10 price 10 9 9 8 3yr fixed 8 rate 7 7 6 6 5 5 4 4 Sources: REIA, Westpac Economics 3 3 Mar-93 Mar-96 Mar-99 Mar-02 Mar-05 Mar-08 Mar-11 20
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Dwelling prices: Sydney vs Melbourne index index200 200 Sydney Melbourne +78%180 180160 160140 +30% 140120 120100 100 80 *all dwellings, Dec 2002 = 100 80 Sources: RP Data-Rismark, Westpac Economics 60 60 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 21
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Auction clearance rates recover st. devns st. devns 3 Sydney (14%) Melbourne (20%) Brisbane (2.5%) 3 2 2 1 1 0 0 -1 -1 -2 *seas. adjusted by Westpac, smoothed, std. devns -2 from long run average; figures show avg proportion Sources: RP of properties sold via auction (i.e. vs private treaty) Data-Rismark, Westpac -3 -3 Apr-93 Apr-98 Apr-03 Apr-08 Apr-13 22
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Westpac mortgage arrears – QLD is risky % % 1.2 1.2 NSW/ACT * 90+ day delinquencies 1.0 VIC/TAS 1.0 QLD 0.8 0.8 WA 0.6 0.6 0.4 0.4 0.2 0.2 Sources: Westpac Economics 0.0 0.0 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 23
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Residential real estate listings – QLD oversupply % Australia US % 16 including estimated „shadow 16 months of supply* inventory‟ of properties still 14 % dwelling stock in foreclosure process 14 rental vacancy rate 12 * at current sales pace 12 Sources: RP 10 Data, ABS, NAR, US Census 10 Bureau, CoreLogic, Westpac 8 8 long run avg 6 6 4 4 2 2 0 0 capitals Syd Melb Bris current 2007-08 24
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Dwelling completions: NSW vs Vic % % 25 25 NSW Vic 22% *total completions since 20 Dec 2002, % of stock 20 Sources: ABS, Westpac Economics 15 15 13% 10 10 5 5 0 0 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 25
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED New dwelling construction –Vic. looks very heavy index index 150 150 Sources: ABS, Westpac Economics Mar ‟08 = 100 130 WA Qld SA 130 110 110 90 90 70 70 NSW Vic Tas 50 50 Jun-05 Jun-09 Jun-05 Jun-09 26
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Economic growth: state by state % chg 7 Sources: ABS, Westpac Economics 6.7 6 5 2009/10 2010/11 2011/12 4.3 4.0 4.0 4 3.4 3 2.7 2.6 2.4 2.4 2.32.1 2.3 2.0 2.1 1.9 2 1.4 1.0 1.0 1 0.5 0.10.2 0 Tas SA Vic NSW Qld WA Aus
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Business investment: by state $bn Equipment Construction $bn Sources: ABS, Westpac Economics 20 ‟03/04 to ‟07/08 20 NSW + Vic 16 NSW + Vic 16 WA + Qld 12 WA + Qld 12 8 8 4 4 0 0 Jun-91 Jun-99 Jun-07 Jun-91 Jun-99 Jun-07
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Domestic demand: state view % ann % ann 12 Sources: ABS, Westpac Economics 18 2qtr avg 15 9 12 6 9 6 3 3 0 0 -3 -3 NSW Vic WA Qld -6 -6 -9 Jun-96 Jun-02 Jun-08 Jun-96 Jun-02 Jun-08
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Consumer spend: diverge % ann % ann 12 12 latest 6mths 10 South East * Qld, WA, NT 10 (annualised) 8 * NSW, Vic, SA, Tas, ACT 8 6 6 4 4 2 2 0 0 Sources: ABS, Westpac Economics -2 -2 Jun-92 Jun-96 Jun-00 Jun-04 Jun-08 Jun-12
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Established house prices stabilise % ann % ann 50 50 40 Sydney Brisbane 40 30 Melbourne Perth 30 20 20 10 10 0 0 -10 -10 Sources: ABS, Westpac Economics -20 -20 Jun-00 Jun-08 Jun-00 Jun-08
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Employment by state % chg 6mth, annualised % chg * smoothed 8 8 NSW Vic Qld WA 6 6 4 4 2 2 0 0 -2 -2 Sources: ABS, Westpac Economics -4 -4 Aug-07 Aug-10 Aug-07 Aug-10
  • Date Department Client Job No. Page ‹#›UNCLASSIFIED Non-residential construction pipeline $bn Non-res. building Infrastructure $bn 10 140 Sources: ABS, Westpac Economics Approvals qtrly 120 8 South-east 100 6 Qld, WA, NT Work Yet to be Done 80 Public works South-east 60 4 boost Qld, WA, NT 40 2 20 0 0 Jun-91 Jun-99 Jun-07 Mar-91 Mar-99 Mar-07