1. A Global Economic and Market Outlook March 2009 Presented by Dr Chris Caton

2. 2 Financial Market Forecasts Now (27 Feb) End-Jun 2009 End-Dec 2009 AUD/USD 0. 640 0.690.73 Official cash rate (%) 3.25 2.50 10 Year Bond yield (%) 4.31 4.404.60 ASX 200 3345 37004200

3. 3 The Australian Dollar and US Trade Weighted Index Source: Datastream IndexAUD/USD US TWI inverted (LHS) AUD/USD (RHS)

4. 4 Exchange-rate volatility has been very high

5. 5 Australian Sharemarket Performance – ASX200 Source: Bloomberg

6. 6 Australian Sharemarket Performance – ASX200 (log scale) Source: Bloomberg

7. 7 Australian p/e ratios

8. 8 Largest falls in Australian equities

9. 9 US Housing starts and Permits Source: Datastream (Millions)

10. 10 Total US Non-farm Employment Source: Datastream 3mth / 3mth chg

11. 11 2009 Growth Forecasts (%) Month of Forecast A-08S-08O-08N-08D-08J-09F-09 Australia2.6 2.11.71.10.90.3 New Zealand1.7 1.30.60.2-0.2-0.9 US1.4 0.0-0.6-1.3-1.8-2.1 Japan1.20.90.5-0.1-0.9-1.7-3.8 China9.29.18.88.17.87.47.0 Germany1.10.80.3-0.4-1.2-2.0-2.5 UK0.90.6-0.2-0.9-1.5-2.2-2.6 “World”2.62.51.91.10.4-0.2-0.8 Source: Consensus Economics

12. 12 Trading partners growing significantly below trend

13. 13 Real GDP growth in Australia and the US Source: Datastream Year to % change

14. 14 The Labour market Source: ABS 000’s% Employment (LHS) Unemployment Rate (RHS)

15. 15 Australian Inflation Source: ABS % BT Forecasts GST Effect

16. 16 Petrol Prices relative to CPI Source: ABS

17. 17 Household debt and interest

18. 18 Hang on…help is on the way

19. 19 House Prices - Australia v Brisbane Source: ABS Index (1987 = 100)

20. 20 Real metal prices Sources: IMF International Financial Statistics; US Bureau of Labor Statistics; Economics@ANZ. Commodity prices are finally falling

21. 21 Gross Domestic Product Source: ABS % BT Forecasts GST Effect

22. 22 Source: Consensus Economics GDPInflation Australia2.92.8 New Zealand2.52.6 United States2.32.0 Canada2.31.9 Sweden2.12.2 Norway2.02.4 Spain1.92.3 United Kingdom1.82.1 France1.61.7 Netherlands1.51.8 Switzerland1.51.4 Euro zone1.51.9 Germany1.21.5 Japan1.00.3 Italy0.92.0 Global Medium-Term Economic Growth and Inflation Prospects (2008-2021)

23. 23 Asia-Pacific Medium-Term Economic Growth and Inflation Prospects (2008-2018) GDPConsumer Prices China8.53.7 India7.55.2 Indonesia5.86.0 Malaysia5.33.0 Thailand5.13.3 Singapore4.82.5 Taiwan4.42.1 South Korea4.22.9 Hong Kong4.13.2 Australia2.92.8 New Zealand2.52.6 Japan1.00.3 Source: Consensus Economics

24. 24 Morgan Stanley Capital Indexes Source: Datastream Developed IndexAsian Emerging Markets Index Asian Emerging Markets Index (RHS) World Developed Index (LHS)

25. 25 Summary  2009 will be a very poor year for the world economy. A deep recession in the US is (more than) fully priced in. The risk is that it drags on.  The Australian economy has slowed, and is almost certainly already in recession. No matter what, it will be a tough year for many.  Interest rates will continue to fall.  The exchange rate is below fair value and likely to rise.  Stocks are cheap right now.

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