The document provides an economic update from Craig James, Chief Economist at CommSec. It summarizes that the global economy is in a healing process led by growth in China, the US is recovering but China's growth is critical, and Australia's economy is benefitting from China's industrialization through demand for resources. CommSec forecasts continued economic growth in Australia around 3% in 2010, inflation rising to 2.75% by year-end, unemployment falling to 4.75%, and the stock market and Australian dollar trending higher by December 2010.

1. W1 - Economic update
Craig James
Chief Equities Economist
CommSec

2. Economy 2010:
“May you find what you are looking for”
media.merchantcircle.com
Craig James
Chief Economist, CommSec, April 2010

3. Important information
This presentation has been prepared without taking account of the
objectives, financial situation or needs of any particular individual.
Before acting on the information in this seminar, you should consider its
appropriateness to your circumstances and, if necessary, seek
appropriate professional advice.
Commonwealth Securities Limited ABN 60 067 254 399
AFSL 238814 (CommSec) is a wholly owned but non-guaranteed
subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124
and a Participant of the ASX Group.
Examples used in this presentation are for illustrative purposes only.

4. Australia & the World
Global healing process
Two speed global economy
Asia’s decade
Two-speed domestic
economy
China & population
World focus is on debt
Australia’s focus is on
sustainable prosperity.

5. The Big Picture
Drivers of world economy
Contribution to growth 2010
percentage points
China 0.85
United States 0.76
India 0.19
Japan 0.17
Newly indust.Asia 0.15
Brazil 0.15
ASEAN 5 0.12
Russia 0.08
Germany 0.07
France 0.07
Canada 0.07
Mexico 0.06
Other countries 1.46
WORLD 4.2
Source: IMF, CommSec
* Newly industrialised Asia - Hong Kong, Taiwan
Singapore and South Korea
ASEAN 5 - Indonesia, Malaysia, Thailand
Phillipines, Vietnam

6. World in recovery
US economy recovers…
but major hopes rest with China… www.flixsnips.com/hong-kong-advertisment-skyline/

7. China awakes
Land of 1.3 billion people industrialises… www.novinite.com
Major resource demands…

8. China on industrialisation path
Same path, different sizes of
population.
www.thenewmans.id.au

9. Australia in 2010 and beyond
No recession
China, population &
construction
Managing prosperity
Two-speed?
Housing shortage
Tightening job market
Policy challenges.

10. New commodity boom

11. Population & Construction
Population growth…opportunities & challenges…
Construction pipeline is full…

12. Two speed economy
Western Australia & Queensland:
65% of exports; 50% of investment…

13. So What?
Housing issues Home prices to rise 5-8% in
2010
High prices?…demand & supply…
but is housing really unaffordable?

14. Business & Consumers
Confidence rebounds to near record highs…
…but reluctant to spend & borrow…
WHAT WE SPENT IN 2009
selected, percent change on year ago
BOATS, CARAVANS, BICYCLES 39.1
WATER & SEWERAGE CHARGES 17.7
SPORTING & RECREATIONAL SERVICES 16.9
TAKE-AWAY FOOD 13.8
MEDICINES MEDICAL AIDS 13.6
LIQUOR STORES 13.3
PURCHASE OF VEHICLES -4.3
JEWELLERY, WATCHES, CLOCKS -11.4
MOTORING FUEL -12.9
NEWSPAPERS & BOOKS -13.2
Source: CommSec, based on ABS data

15. Looking ahead
Winners
Housing-dependent
industries & retailers
Large retailers
Consumers
Imports
Losers/Challenges
Tourist operators/regions
Small retailers
‘Old economy’.

16. So What?
Outlook for jobs Skilled staff in demand;
wage costs to rise
Firms didn’t fire, didn’t hire…
Flexible work practices to continue…

17. So What?
Outlook for interest rates More rate hikes in
2010; Fix vs. Variable
RBA near normal…where do we go from here?
Savers are key winners…

18. So What?
Aussie dollar & shares Competition for funds;
Budgeting, exports
Shares to rise in line with stronger economies…
Aussie may ease, but still above-average…

19. Global Wall of Worry
Debt, debt and debt World's largest economies
2009, US$ billion % total
Stimulus to be withdrawn 1 United States $14,256 24.6
2 Japan $5,068 8.7
Double-dip recession? 3 China $4,909 8.5
4 Germany $3,353 5.8
US mortgage 5 France $2,676 4.6
foreclosures 6 United Kingdom $2,184 3.8
7 Italy $2,118 3.7
Commercial property 8 Brazil $1,574 2.7
9 Spain $1,464 2.5
10 Canada $1,336 2.3
Dubai, Greece, Spain 11 India $1,236 2.1
12 Russia $1,229 2.1
China boom, yuan. 13 Australia $997 1.7
28 Greece $331 0.6
Source: IMF, CommSec

20. Budgets & Debt

21. CommSec forecasts
FORECASTS
Economic growth 1.70% in 2009
3.25% in 2010
Inflation 2.50% mid-2010
2.75% end-2010
Unemployment 5.25% mid-2010
4.75% end-2010
Cash rate 4.50% mid-2010
4.75-5.00% end-2010
Sharemarket 5,150 by June 2010
5,600 by December 2010
Australian dollar US95c in June 2010
US90c in December 2010

22. www.despair.com

23. Disclaimer:
This paper represents the opinion of the author(s) and not necessarily those of the Institute of Chartered
Accountants in Australia (the Institute) or its members.
The contents are for general information only. They are not intended as professional advice - for that you
should consult a Chartered Accountant or other suitably qualified professional.
The Institute expressly disclaims all liability for any loss or damage arising from reliance upon any information
in these papers.