BT Monthly Markets Chart Pack – October 2008

1. BT Monthly Markets Chart Pack – October 2008 An overview of movements in global financial markets

2. Global share markets hammered in October... Moves by US and other governments to prevent a collapse of their respective financial systems weren’t enough to appease investors already hurt by big losses in September. In the US, stocks closed the month 16.9% lower, while bourses in the UK (-10.7%), Europe (-14.7%) and Japan (-23.8%) also finished well in the red. 2

3. …but continue to perform well over the long-term, despite some major market events Impact of major market events on global shares since 1986 Jul 01 Tech Wreck Jun 07 US Sub-prime Crisis Sep 01 Attack on Twin Towers Jul 98 Russian Bond Crisis Aug 97 Asian Currency Crisis Nov 89 Fall of the Berlin Wall Feb 94 Bond Market Crash Mar 03 Troops enter Iraq Oct 87 Wall Street crash Jan 91 Gulf War Global shares measured by the MSCI World ex-Australia (net dividends) Index in A$. Source: BT Financial Group, MSCI

4. The Australian share market fared a little better … The S&P/ASX 200 Accumulation Index closed the month 12.6% lower. The fall came largely on the back of a poor lead from the US and weaker commodity prices, which really hurt our big mining stocks. 4

5. S&P/ASX 200 Accumulation Index – year to 31 October 2008 Source: BT Financial Group, Premium Data

6. Key Australian economic news – October • The Reserve Bank cut interest rates by 1.00% in October and again by 0.75% at its early November meeting in a bid to improve the flow of credit to consumers and businesses. • Australia’s international trade balance was in surplus by $1.364 billion in August. It followed a deficit of $697 million in July and came on the back of strong growth in exports and falling imports. • The Westpac/Melbourne Institute consumer sentiment index fell 10.2pts to 82.0 in October, with all five component indices falling in the month. Of these, ‘economic conditions in the next 12 months’ registered the worse decline while ‘employment expectations’ also slipped sharply. • Newspaper job ads gained 0.7% in the month of September, while Internet-based job ads registered a second consecutive monthly decline, down 1.5%. Source: BT Financial Group

7. The Australian dollar hit hard in October • The Australian dollar (A$) fell 15.8% against the US dollar (US$) in October thanks to weaker commodity prices and a resurgent US$. With commodity prices likely to remain under pressure in the near-term and the RBA expected to cut interest rates again this year, it’s likely that the A$ will fluctuate around current levels as we move into 2009. • At the end of October: A$1 bought US$0.6676 -15.8% €0.5248 -6.7% ¥65.72 -21.9% Source: BT Financial Group

8. The Australian dollar versus the US dollar… Currency markets – A$ per US dollar Source: BT Financial Group. Figures at 31 October 2008.

9. the Euro… Currency markets – A$ per Euro Source: BT Financial Group. Figures at 31 October 2008.

10. and the Yen Currency markets – A$ per Yen Source: BT Financial Group. Figures at 31 October 2008.

11. Official world interest rate movements – October • In Australia, the Reserve Bank cut the official cash rate a further 0.75% (to 5.25%) at its early November meeting. Elsewhere (in October), the European Central Bank, the Bank of England and the US Federal Reserve all cut their benchmark interest rates, while the Bank of Japan left theirs’ on hold. Source: BT Financial Group

12. Global share market returns 31 October 2008 Source: BT Financial Group

13. Short-term asset class performance 1-year rolling returns to 31 October 2008 (%) Best performing asset class for the year Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$

14. Short-term asset class performance (cont’d) 1-year returns to 31 October 2008 (%) 31 October 2007 31 October 2008 Australian bonds Listed property Australian shares Global bonds Global shares Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$

15. Long-term asset class performance 31 October 2008 Australian shares Listed property Australian bonds Global shares Cash 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, Citigroup World Government Bond, Unhedged in A$

16. Oil prices fell again in October as demand evaporated in line with the slowing global economy Oil prices – US$ per barrel Source: BT Financial Group. West Texas Intermediate oil price at 31 October 2008.

17. Summary • The underlying strength of the Australian economy, relative to its global counterparts, looks set to continue in the near-term. Admittedly, we are beginning to feel the knock-on effects of a slowdown that’s impacted countries like the US and the UK. • The RBA’s decision to lower the official cash rate in October and again in November highlights the Bank’s concern that the economy is heading into recession. • In line with this view, there’s a chance the RBA will cut rates again in December. • The Australian dollar has fallen 23.8% so far this year. With commodity prices likely to remain under pressure in the near-term and a possible rate cut in December, we think it will continue to trade around current levels as we move into 2009. • Gains in share markets are likely to remain under pressure in the near-term.

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