1. Economic Update Mark Rider, Head of Investment Strategy

2.  Global growth: better and worse  The Transition Twins: China and Australia  Equities: home, away or just stay away?  What it all means for your clients Three themes and their implications 1

3. Global Growth - better as at long run trend … 2 Source: Thomson Reuters Datastream, ANZ Global Wealth

4. … and unemployment has fallen a long way 3 Source: Thomson Reuters Datastream, ANZ Global Wealth

5. But worse as lower trend growth means lower returns 4 Source: Bloomberg, ANZ Global Wealth

6. Growth has disappointed this year… 5 2015 ANZ Forecast Dec 14 Source: Thomson Reuters Datastream, ANZ Global Wealth

7.  Weaker potential growth  lower interest rates  DM avoids home grown deflation  end to negative rates  Weak EM imparts a deflationary shock  lower rates, commodities, resources stock and AUD Bottom line: Interest rates to remain low Implications 6

8. China – slowdown you move to fast 7 Source: Bloomberg, ANZ Global Wealth

9. A slowdown where it hurts Australia 8 Source: Bloomberg, Thomson Reuters Datastream, ANZ Global Wealth

10. It’s not all bad news, just different 9 Source: China National Bureau of Statistics, ANZ Global Wealth

11. The economy may be slower than GDP suggests 10 Source: China National Bureau of Statistics, ANZ Global Wealth

12. Where will it end? 11 Source: Thomson Reuters Datastream, ANZ Global Wealth

13. Where will it end? 12 Source: Thomson Reuters Datastream, ANZ Global Wealth

14. As China’s nominal growth collapses… 13 Source: Thomson Reuters Datastream, ANZ Global Wealth

15. As China’s nominal growth collapses… 14 Source: Thomson Reuters Datastream, ANZ Global Wealth

16. A capex cliff looms 15 Source: Australian Bureau of Statistics, ANZ Global Wealth

17. Housing is the only source of growth 16 -3.0%-0.5%+0.5% Source: Australian Bureau of Statistics, ANZ Global Wealth

18. AUD remains under pressure 17 Source: Bloomberg, Thomson Reuters Datastream, ANZ Global Wealth

19.  China not growing how it used to  lower commodity prices  Australian capex cliff  sub trend growth and lower rates  A$ under pressure Implications 18

20. Equities – home, away or just stay away? 19 Source: Bloomberg, ANZ Global Wealth

21. It’s all to do with earnings 20 Source: Bloomberg, ANZ Global Wealth

22. Current versus “mid cycle” earnings 21 Source: Bloomberg, ANZ Global Wealth

23. Equities – reasonable value 22 Source: Thomson Reuters Datastream, ANZ Global Wealth

24. Home or away? 23 Source: Thomson Reuters Datastream, ANZ Global Wealth

25.  Equities – no longer cheap, but not really expensive  Earnings growth likely issue for Australia and EM  Falling terms of trade favours DM over Australia Implications 24

26. 10 year bond yields – where to now? 25 Source: Bloomberg, Thomson Reuters Datastream, ANZ Global Wealth

27. 10 year bond yields – where to now? 26 Source: Bloomberg, Thomson Reuters Datastream, ANZ Global Wealth

28. 10 year bond yields – where to now? 27 Source: Bloomberg, Thomson Reuters Datastream, ANZ Global Wealth

29. 10 year bond yields – where to now? 28 Source: Bloomberg, Thomson Reuters Datastream, ANZ Global Wealth

30. Lower expected returns in prospect 29 Source: Mercer, Bloomberg, ANZ Global Wealth

31.  Forces continue for low interest rates but now poor returns  Equity valuations okay, but earnings growth the issue  Prospective returns have moderated  Tactically cautious Conclusions 30

32. This information is issued by the Australia and New Zealand Banking Group Limited (ABN 11 005 357 522, AFSL 234 527). The information is current as at 20 August 2015 and will be subject to change. The information is of a general nature and has been prepared without taking account of your or your clients personal needs, financial circumstances or objectives. It is intended for informational purposes only. Whilst every effort has been taken to ensure the information used is accurate and reliable, no warranty is given as to the accuracy of the information and no liability is accepted for your reliance on the information. The views expressed are those of the presenters based on their interpretation of current market conditions and data. Statements made during the presentation do not and are not intended to represent financial advice or a recommendation to hold, acquire or dispose of any investment. Before acting on this information you should consider whether the information is appropriate having regard to your or your clients personal needs, financial circumstances or objectives. Investors should always read the Product Disclosure Statement for the relevant product and seek financial advice before making an investment decision. Before making any investment decision you need to consider whether there are any adverse consequences for you or your clients, including exit fees, other loss of benefits or increase in investment risks. Past performance is not indicative of future performance. Any investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Before making any investment decision you need to consider whether there are any adverse consequences for you or your clients, including exit fees, other loss of benefits or increase in investment risks. ANZ's colour blue is a trademark of ANZ. Disclaimer 31