Slide 1

Economic and

Investment Markets Update

20th March 2014

Slide 2

This presentation and the associated discussion is general

in nature and does not take your individual situation into

account. You should not act on anything contained

herein, or discussed as a consequence of the contents of

this document, without receiving personal financial

advice from a suitably qualified person such as a

financial advisor.

Slide 3

A look at the global economic environment

&

Australia: the State of the Nation

&

An update on investment markets

Slide 4

Slide 5

The US economy has continued to improve, despite a very cold winter and cuts to government spending

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Slide 7

The start of the Reagan years

The end of Obama’s first term

Slide 8

US Government Debt as a Percentage of US GDP

US Government Debt is projected to reach World War II levels

Slide 9

How will the US Federal

Reserve manage its

gradual withdrawal of

monetary stimulus?

Slide 10

China is growing quickly, but US economic dominance is expected to last for some time

Slide 11

Significant growth in US gas and oil production

Slide 12

The cost of a gallon of petrol in US$

Cheap

Expensive

Neither cheap nor expensive

Slide 13

No change

in 5 years

Slide 14

Europe’s problems primarily stem from:

• Too much government debt (still)

• Inflexible labour market (compared to the US)

• High energy and labour costs

Slide 15

“Dangerous” level of debt

Slide 16

Slide 17

China US

Europe

Slide 18

China has been the

primary driver of the

commodities boom

Slide 19

Canada, Brazil, Saudi Arabia

and Australia –key mining investment destinations

for China

Slide 20

The US, Brazil, and Australia –

key agricultural investment destinations

for China

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Slide 22

The global economy is recovering, but progress is slower than usual

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Slide 24

Overall GDP

Contribution to GDP Growth

Mining investment

Non- Mining investment

Housing

Slide 25

Housing interest rates

RBA Cash Rate

Slide 26

First home buyers are priced out of the market

Demand is largely from investors and existing homeowners

Loan approvals and housing

credit are improving

Slide 27

Outside of Sydney and

Melbourne, house price growth is only average

at best

Slide 28

The ‘GFC’Households

are still focused on

debt reduction and are

reluctant to spend

Slide 29

A slight improvement in retail sales

growth figures

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Slide 31

Unemployment in an upward trend

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Housing construction Unemployment

Interest rates Mining slowdown

Retail sector China

Slide 33

US Fed ‘taper’

Emerging market concerns

Russia & the Ukraine

ASX All Ordinaries Index

Slide 34

1987 crash

‘Dot com’ bubble

Pre-GFC peak

Market low –Mar 2009

“The recession we had to have”

Slide 35

ASX All Ordinaries Index

Slide 36

• Australian economic growth will be weak for the next 12 to 18 months (although exports may be high)

• Interest rates steady until late 2014 or early 2015 as housing construction increases pace

• The global economy is improving, but further easing in China will impact Australia (no more ‘ghost cities’ likely to be built)

• Our investment approach remains focused on:- Companies with sound balance sheets and reliable dividends (WOW, WES, TLS)- Conservatively-geared property trusts (BWP, GPT)- Selective exposure to ‘unloved’ cyclicals (TOL, LEI, QBE)

Slide 37

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