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A global economic and market outlook

A global economic and market outlook. Dr Chris Caton May 2014. Australia simply doesn’t have a government debt problem (general govt net debt as a proportion of GDP). And here’s a longer-term perspective on our public debt (% of GDP).

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A global economic and market outlook

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  1. A global economic and market outlook Dr Chris Caton May 2014

  2. Australia simply doesn’t have a government debt problem (general govt net debt as a proportion of GDP)

  3. And here’s a longer-term perspective on our public debt (% of GDP)

  4. The path back to balance is gradual (deficit as a % of GDP)

  5. For those who would like more detail

  6. The economic forecasts behind the Budget appear reasonable

  7. The Budget’s implication for debt; still no problem

  8. QE matters– the Fed buys bonds, investors buy stocks

  9. Euro-area government bond spreads (to German bonds)

  10. The two that matter continue to improve(long-term bond yields (%))

  11. Emerging markets have massively underperformed Developed Index Asian Emerging Markets Index World Developed Index (LHS) Asian Emerging Markets Index (RHS) Source: Datastream

  12. Emerging markets tend to reflect commodity prices

  13. 2014 Growth Forecasts (%) Month of Forecast Source: Consensus Economics

  14. Financial Market Forecasts

  15. The Australian Dollar and US Trade Weighted Index Index AUD/USD AUD/USD (RHS) US TWI inverted (LHS) Source: Datastream

  16. The volatility of the currency has fallen significantly

  17. Australian Share market Performance – ASX200 Source: Bloomberg

  18. The Australian market is now close to fair value

  19. The p/e by sector. Resources the best value?

  20. There’s no sign of a bubble in global markets

  21. We are in almost perfect sync with the United States market

  22. Real GDP growth in Australia and the US Year to % change Source: Datastream

  23. The terms of trade should continue to decline

  24. Unemployment has risen significantly..but has it peaked? 000’s % Employment (LHS) Unemployment Rate (RHS) Source: ABS

  25. Two speeds or not two speeds, that is the question

  26. Australian Inflation has risen % BT Forecasts GST Effect Source: ABS

  27. Household financial ratios

  28. House Prices - Australia v Sydney Index (1987 = 100) Source: ABS

  29. We are very expensive compared with the United States

  30. But not otherwise!

  31. House prices are rising everywhere, particularly in Sydney and Melbourne

  32. Prices have been rising rapidly in just two cities in the past year (% increase year to April 2014)

  33. Where’s the bubble? Average house price increase in the past ten years

  34. Gross Domestic Product % BTForecasts GST Effect Source: ABS

  35. Global Medium-Term Economic Growth and Inflation Prospects (2014-2024) Source: Consensus Economics

  36. Asia-Pacific Medium-Term Economic Growth and Inflation Prospects (2014-2024) Source: Consensus Economics

  37. Summary • Tapering of quantitative easing in the US has added to market volatility. • Eurozone debt is still a serious issue; it will drag on for a long time but is unlikely to end in catastrophe. • We will always worry about China. • The Australian economy should continue to experience only moderate growth. The mining investment boom has ended but the downside may not be too steep. • The cash rate’s next move is up. • The exchange rate may eventually fall again. • The Australian share market is close to fair value.

  38. Disclaimer This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ and is for general information only.  Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described.  The presentation has been prepared without taking into account any personal objectives, financial situation or needs.  It does not contain and is not to be taken as containing any securities advice or securities recommendation.  Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice.  BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation.  Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person.  Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee.  It is important to note that past performance is not a reliable indicator of future performance. This document was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author. For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney time)

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