In March 2014 we presented to an economic and market update to our clients, covering the economic and financial situation in Australia and globally.

1. Slide 1
Economic and
Investment Markets Update
20th March 2014

2. 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.

3. Slide 3
A look at the global economic environment
&
Australia: the State of the Nation
&
An update on investment markets

4. Slide 4

5. Slide 5
The US economy has continued to improve, despite a very cold
winter and cuts to government spending

6. Slide 6

7. Slide 7
The start
of the
Reagan
years
The end
of
Obama’s
first term

8. Slide 8
US Government Debt as a Percentage of US GDP
US Government Debt is projected to reach World War II levels

9. Slide 9
How will the
US Federal
Reserve
manage its
gradual
withdrawal of
monetary
stimulus?

10. Slide 10
China is growing quickly, but US economic dominance is expected to last for some time

11. Slide 11
Significant
growth in
US gas and
oil
production

12. Slide 12
The cost of a gallon of
petrol in US$
Cheap
Expensive
Neither
cheap nor
expensive

13. Slide 13
No
change
in 5
years

14. 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

15. Slide 15
“Dangerous”
level of debt

16. Slide 16

17. Slide 17
China US
Europe

18. Slide 18
China has
been the
primary driver
of the
commodities
boom

19. Slide 19
Canada, Brazil,
Saudi Arabia
and Australia –
key mining
investment
destinations
for China

20. Slide 20
The US, Brazil,
and Australia –
key
agricultural
investment
destinations
for China

21. Slide 21

22. Slide 22
The global economy is recovering, but progress is slower than usual

23. Slide 23

24. Slide 24
Overall GDP
Contribution to GDP Growth
Mining
investment
Non- Mining
investment
Housing

25. Slide 25
Housing
interest
rates
RBA Cash
Rate

26. 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

27. Slide 27
Outside of
Sydney and
Melbourne, hou
se price growth
is only average
at best

28. Slide 28
The ‘GFC’
Households
are still
focused on
debt reduction
and are
reluctant to
spend

29. Slide 29
A slight
improvement
in retail sales
growth figures

30. Slide 30

31. Slide 31
Unemployment in
an upward trend

32. Slide 32
Housing construction Unemployment
Interest rates Mining slowdown
Retail sector China

33. Slide 33
US Fed ‘taper’
Emerging
market concerns
Russia & the
Ukraine
ASX All Ordinaries Index

34. Slide 34
1987 crash
‘Dot com’
bubble
Pre-GFC
peak
Market low –
Mar 2009
“The recession
we had to have”

35. Slide 35
ASX All Ordinaries Index

36. 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)

37. Slide 37
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