the essential director update_steven shepherd

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Economic update Australian Institute of Company DirectorsThe Essential Director Update: 13

Steven ShepherdSenior Economic AdvisorGrant Thornton Australia


Australia Canada Germany New Zealand

UK USA China India Euro area

G7 Total OECD

-2

0

2

4

6

8

10

12

2010201120122013 (f)

Only 4 OECD economies never entered a GFC-induced recession including Australia (also China and India).

Global economic trendsAnnual GDP growth rates (December quarter on December quarter)


Corporate sector

(ASX 300 Quarterly Business Survey: June 2013 - NAB Monthly Business Survey: August 2013) • Business confidence weakened across the economy (June 2013)• NAB Monthly Business Survey: September 2013 Survey rose to highest in nearly three and a half

years

SME sector

(Sensis Business Index: survey of 1,800 SME's across Australia in September 2013)• SME business confidence fell further during September • Lack of work is the biggest barrier to taking on new employees

Consumers

(Westpac/Melbourne Institute of Consumer Sentiment: survey of 1,200 consumers in October 2013)• Consumer sentiment fell back somewhat in October, after a 4.6% jump in September • The survey was conducted around one month after Federal Election – still 9.2% above 12 months

ago

Confidence trends across the Australian economy


US unemployment rate and quantitative easing

2008 2009 2010 2011 2012 20130.0

2.0

4.0

6.0

8.0

10.0

12.0

Unemployment rate

%

QE2: November 2010 - June 2011

November 2010: FED - $600B pro-gram through to 2Q 2011

QE1: December 2008 - June 2010

November 2008: FED announces a pro-gram of $800B

QE3: From September 2012

September 2012: FED - $85B a month19 June 2013QE U/R target 7% INF: 2%GDP: 2.3%-2.6%


• The Australian dollar is 90 cents against the US$ (±5%) – expected to ease over the medium term

• RBA Cash Rate – 2.5% – it is believed this will be cut by 25 basis points in next three months and will rise again in 2014

• Australian economy– currently at 2.6% growth and projected growth in 2014/15 is 3%

• USA Economy – QE3 = >10% of US Money Supply (M2 - growth accelerating)– US GDP will rise from 2.5% during 2014– US federal funds discount rate will rise from (effective) 0.08% in 2014

• Chinese Economy – GDP growth to >7.5% in 2013 (China Central Bank)– industrial activity >10% which shows robust growth

Key economic projections