In October 2009, global share markets exhibited significant weakness due to concerns over corporate earnings, resulting in declines across various regions including the US, Europe, and Australia. The Australian dollar appreciated against the US dollar on expectations of further interest rate hikes, while the Reserve Bank of Australia raised interest rates by 0.25%. Economic indicators showed modest job growth and consumer sentiment improvement, despite a slight decline in retail trade.

1. BT Monthly Markets Chart Pack – October 2009 An overview of movements in global financial markets

2. Global share markets weaker across the board in October... Global share markets were weaker across the board in October thanks in large part to concerns that corporate earnings will fail to justify the huge run-up in share prices since March of this year. In the US the market closed the month 2.0% lower and this had a knock-on effect elsewhere, with markets in Europe (-4.5%), the UK (-1.7%) and Japan (-1.0%) all closing in the red. The Australian share market ended its run of seven consecutive monthly gains in October, with the S&P/ASX 200 Accumulation Index closing 2.1% lower. The fall came after a poor lead from the US market overshadowed some better-than-expected consumer confidence and unemployment numbers.

3. …but continue to perform well over the long-term, despite some major market events Global shares measured by the MSCI World ex-Australia (net dividends) Index in A$. Source: BT Financial Group, MSCI Impact of major market events on global shares since 1987 Jan 91 Gulf War Feb 94 Bond Market Crash Aug 97 Asian Currency Crisis Jul 98 Russian Bond Crisis Jul 01 Tech Wreck Sep 01 Attack on Twin Towers Jun 07 US Sub-prime Crisis Nov 89 Fall of the Berlin Wall Mar 03 Troops enter Iraq

4. The Australian share market closed 2.1% lower in October Source: BT Financial Group, Premium Data S&P/ASX 200 Accumulation Index – year to 31 October 2009

5. Key Australian economic news – October As was widely expected, the Reserve Bank raised interest rates by a further 0.25% (to 3.50%) at its early November meeting. With the local economy well placed compared to many of its global counterparts, the Bank has now shifted its focus from growth to inflation. The Consumer Price Index rose by 1.0% in the September quarter and was 1.3% higher for the year. The rise was slightly higher than the market had expected and follows a 0.5% jump in prices in the June quarter. The Australian economy gained 40,600 jobs in September and this helped to bring the unemployment rate down from 5.8% to 5.7%. The Westpac/Melbourne Institute’s consumer sentiment survey jumped another 1.7% in October – its fifth consecutive monthly gain. Retail trade fell 0.2% in September, though it remains 6.0% higher for the year. Source: BT Financial Group

6. The Australian dollar hits US$0.93 cents on expectations of further interest rate hikes The Australian dollar (A$) continued its remarkable run against its US counterpart in October, gaining a further 1.8% on expectations that the RBA would raise interest rates again in November. The local currency hit as high as US$0.9310 cents before eventually closing at US$0.8991 cents. The A$ is now up 50% against the US$ since hitting a low of US$0.6012 cents in October last year and looks set to test the US$0.95 cent mark within the next couple of months. At the end of October: A$1 bought US$0.8991 +1.8% € 0.6114 +1.2% ¥80.99 +2.1% Source: BT Financial Group

7. The Australian dollar versus the US dollar… Currency markets – A$ per US dollar Source: BT Financial Group. Figures at 31 October 2009

8. the Euro… Currency markets – A$ per Euro Source: BT Financial Group. Figures at 31 October 2009

9. and the Yen Currency markets – A$ per Yen Source: BT Financial Group. Figures at 31 October 2009

10. Official world interest rate movements – October It was yet another dull month in terms of interest rate movements, with all the major central banks keeping their respective benchmark rates on hold in October. The Reserve Bank of Australia moved to raise the official cash rate by 0.25% in early November. Source: BT Financial Group Current rate Last moved Direction of last move Australia 3.50% Nov 2009 US 0% - 0.25% Dec 2008 Europe (ECB) 1.00% May 2009 Japan 0.10% Dec 2008 United Kingdom 0.50% Mar 2009

11. Global share market returns Source: BT Financial Group 31 October 2009 1 year 3 years (pa) 5 years (pa) Global S&P 500 Index (US) 6.96% -9.06% -1.72% Nasdaq (US Tech.) 18.84% -4.75% 0.70% Nikkei 225 (Japan) 17.00% -15.10% -1.41% Hang Seng (Hong Kong) 55.73% 5.88% 10.75% DAX (Germany) 8.56% -4.76% 6.46% CAC (France) 3.46% -12.30% -0.54% FTSE 100 (UK) 15.24% -6.29% 1.76% Australia S&P/ASX 200 Accum. Ind. 21.39% -0.55% 8.85% S&P/ASX Small Ordinaries 39.65% -4.19% 5.97% S&P/ASX 300 Listed Prop. -6.11% -21.41% -6.79%

12. Short-term asset class performance Source: S&P/ASX 200 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Barclays Capital Global Aggregate Bond Index hedged to $A , UBS Bank Bill 0+ years 1-year rolling returns to 31 October 2009 (%) Best performing asset class for the year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 Australian cash 3.83 7.80 6.61 5.90 5.71 5.54 4.88 4.67 5.61 6.07 4.94 5.14 5.98 7.68 7.87 5.05 Australian bonds 4.89 10.59 3.62 4.40 5.18 7.17 4.15 4.24 11.67 7.60 -0.61 9.65 13.23 14.56 16.60 -6.11 Australian property -6.11 -56.36 18.48 29.13 12.25 28.99 6.35 10.23 21.22 12.55 -0.27 19.19 17.16 14.33 8.87 0.24 Australian shares 21.39 -37.79 30.27 26.12 23.16 20.51 12.13 -2.81 3.31 19.11 13.99 10.17 9.69 17.51 6.99 -1.03 International bonds 13.42 5.10 5.43 5.48 6.49 9.23 7.26 7.76 12.83 6.68 1.29 10.69 10.62 11.48 17.82 -2.54 International shares -14.53 -17.66 -0.24 16.95 13.00 7.35 -3.48 -22.89 -23.79 24.42 22.15 30.76 31.83 11.54 6.87 -3.43

13. Short-term asset class performance (cont’d) Source: S&P/ASX 200 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Barclays Capital Global Aggregate Bond Index hedged to $A 1-year returns to 31 October 2009 (%) 31 October 2008 31 October 2009 Australian bonds Listed property Australian shares Global bonds Global shares

14. Long-term asset class performance Note: Accumulated returns based on $1,000 invested in December 1984 Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, UBS Bank Bill 0+ years 31 October 2009 Australian bonds Listed property Australian shares Cash Global shares

15. Oil prices ended the month higher on the back of a weaker US$ and expectations of rising demand Source: BT Financial Group. West Texas Intermediate oil price at 31 October 2009 Oil prices – US$ per barrel

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