BT Monthly Markets Chart Pack – August 2008 An overview of movements in global financial markets

2 Global share markets mixed in August...  Global share markets posted mixed returns in August as a number of large US financial institutions announced further write-downs related to the global ‘credit crunch’, sending banking and other financial stocks lower and offsetting another big fall in oil prices.  The Australian share market ended its run of two successive monthly falls in August, with the S&P/ASX 200 Accumulation Index returning a strong +4.1% thanks mainly to rising expectations of interest rate cuts by the RBA. The Australian market is now down 21.9% since its record highs back in November last year and remains 16.5% lower so far in 2008.

3 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 1986 …but continue to perform well over the long-term, despite some major market events 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 Oct 87 Wall Street crash Nov 89 Fall of the Berlin Wall Mar 03 Troops enter Iraq

4 Source: BT Financial Group, Premium Data S&P/ASX 200 Accumulation Index – 2008 The Australian share market closed August 4.1% higher

5 Key Australian economic news – August  The Reserve Bank of Australia (RBA) cut interest rates for the first time in over six years at its early September board meeting, taking the official cash rate from 7.25% to 7.00%. If the Australian economy continues to slow as expected, then we may yet see further rate cuts by the end of this year.  The Australian economy added 53,700 new jobs in July after a gain of 19,700 in the previous month. The unemployment rate was unchanged at 4.3%.  The Westpac/Melbourne Institute’s consumer sentiment survey rebounded in August to be 9.1% higher for the month. However, sentiment remains down 22.4% on this time last year.  Australia’s current account deficit was $1.1 billion wider than the market had expected in the June quarter, coming in at $12.8 billion. It was, however, significantly lower than the $19.8 billion recorded in the March quarter. Source: BT Financial Group

6 The Australian dollar fell again in August  The Australian dollar (A$) continued its slide against the US dollar in August amid expectations of more interest rate cuts by the Reserve Bank. However, with commodity prices expected to stay relatively high over the long-term, the trend in the A$ is likely to remain up.  At the end of August: A$1 boughtUS$ % € % ¥ % Source: BT Financial Group

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

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

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

10 Official world interest rate movements – August  In Australia, the Reserve Bank cut the official cash rate by 0.25% (to 7.00%), the Bank’s first rate cut in over six years. Elsewhere, the European Central Bank, the Bank of England, the Bank of Japan and the US Federal Reserve all left their rates on hold. Current rateLast moved Direction of last move Australia7.00%Aug 2008 US2.00%Apr 2008 Europe (ECB)4.25%Jul 2008 Japan0.50%Feb 2007 United Kingdom5.00%Apr 2008 Source: BT Financial Group

11 Source: BT Financial Group 31 August 2008 Global share market returns 1 year3 years (pa)5 years (pa) Global S&P 500 Index (US)-12.97%1.68%4.94% Nasdaq (US Tech.)-8.81%3.23%5.51% Nikkei 225 (Japan)-21.10%1.74%4.79% Hang Seng (Hong Kong)-11.35%12.57%14.28% DAX (Germany)-15.92%9.97%13.01% CAC (France)-20.84%0.63%6.24% FTSE 100 (UK)-10.58%2.09%6.26% Australia S&P/ASX 200 Accum. Ind %9.43%14.69% S&P/ASX Small Ordinaries-19.43%8.65%14.89% S&P/ASX 300 Listed Prop %-2.26%6.47%

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

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

15 Source: BT Financial Group. West Texas Intermediate oil price at 31 August Oil prices – US$ per barrel Oil prices continued to fall in August on the back of a slowing global economy and a stronger US dollar

16 Summary  The underlying strength of the Australian economy, relative to its global counterparts, looks set to continue in the near-term, though admittedly we are now beginning to feel the knock-on effects of the slowdown that’s impacted countries like the US and the UK.  The RBA’s decision to lower the official cash rate should help to bring inflation under control, though at the moment it continues to sit well outside the Bank’s 2-3% comfort zone. If our economy continues to slow as expected, then there’s a good chance we’ll see another rate cut in the coming months.  The Australian dollar (A$) looks set to remain at high levels over the long-term, supported mainly by still high commodity prices. However, if interest rates here do fall further, then the A$ will lose some ground against the US dollar.  Gains in global share markets, including here in Australia, are likely to remain under pressure in the near-term, particularly as global growth continues to slow down.

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