BT Monthly Markets Chart Pack – July 2008

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

2. Global share markets mixed in July... • July was a mixed month for global share markets as a deteriorating outlook for the world economy and the re-emergence of problems in global credit markets were tempered by a significant drop in the price of crude oil. • For the second month in a row the Australian share market closed lower, with the S&P/ASX 200 Accumulation Index returning -4.6% in July thanks mainly to declines in the local Resources and Financials sectors. The deteriorating outlook for the global economy also contributed to the losses. So far this year the Australian market is down 19.8%, outpacing declines in the UK (-16.2%), Japan (-12.6%) and the US (-13.7%).

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 closed July 4.6% lower S&P/ASX 200 Accumulation Index – 2008 Source: BT Financial Group, Premium Data

5. Key Australian economic news – July • The Reserve Bank of Australia (RBA) left interest rates on hold at 7.25% following its early August meeting. The RBA looks set to leave interest rates on hold for now as it tries to balance rising prices and a slowing economy, though an interest rate cut by the end of the year remains a possibility. • Retail trade fell 0.1% in June, it’s biggest drop in six years. The fall came after a revised rise of 0.9% in May. The market had expected a rise of 0.2%. • 29,800 jobs were added in June, much more than had been expected, while the unemployment rate ticked down 0.1% (to 4.2%). • Australia’s trade balance was in surplus by $411 million in June, following a deficit of $253 million in May. • Headline inflation figures came in stronger than expected in the June quarter, up 1.5% versus an anticipated rise of 1.2% and continuing the pattern seen around the world in recent months. Source: BT Financial Group

6. The Australian dollar fell in July • The Australian dollar (A$) closed the month lower against the US dollar as the threat of any more domestic interest rate hikes began to fade. With commodity prices still at high levels, the trend in the A$ is likely to remain up in the near-term, though we can probably expect it to fall back eventually as the market moves to price in rate cuts either later this year or early next year. • At the end of July: A$1 bought US$0.9417 -1.7% €0.6039 -0.7% ¥101.54 flat 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 July 2008.

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

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

10. Official world interest rate movements – July • The European Central Bank raised interest rates a further 0.25% (to 4.25%) in July. It was the Bank’s first rate hike since June last year. Elsewhere, the Bank of England, the Bank of Japan and the Reserve Bank of Australia (in early August) left their benchmark interest rates on hold. The US Federal Reserve didn’t meet in July. Source: BT Financial Group

11. Global share market returns 31 July 2008 Source: BT Financial Group

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

13. Short-term asset class performance (cont’d) 1-year returns to 31 July 2008 (%) 31 July 2007 31 July 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$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$

14. Long-term asset class performance 31 July 2008 Australian shares Listed property Global shares Australian bonds 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$

15. After spiking above US$147 a barrel early in July, oil prices closed the month lower at just over US$124. Oil prices – US$ per barrel Source: BT Financial Group. West Texas Intermediate oil price at 31 July 2008.

16. Summary • The underlying strength of the Australian economy relative to its global counterparts looks set to continue in the near-term, though any significant deterioration in global growth will obviously have an adverse effect locally. • Though the RBA left interest rates on hold following its early August meeting, the Bank will no doubt be concerned by the high level of domestic inflation, which currently sits well outside its target band of 2-3%. However, if growth continues to slow as expected, it’s possible that we could see an interest rate cut by the end of the year. • The Australian dollar (A$) looks set to remain at high levels in the coming months, supported largely by high commodity prices. However, if interest rates here do start to fall, we should see the A$ start to slide as well. • Gains in global share markets, including here in Australia, are likely to remain under further pressure in the near-term as global growth continues to slow down.

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