Economic Perspectives p from Global to Local What It Could Mean for Your Business Your Business PMA ANZ Newcastle Fresh PMA-ANZ Newcastle Fresh Presentation by: Presentation by: Dean Pearson Head of Industry Analysis NAB Head of Industry Analysis, NAB Friday 18th March 2011
Global Economy Global Economy
Major suppliers of global oil markets Share markets have been extremely volatile recently Share markets have been extremely volatile recently, due to the unrest in Libya. That said, Libya ranks 18th as a producer of oil, dwarfed by Russia and Saudi Arabia. a producer of oil, dwarfed by Russia and Saudi Arabia. 3
Global Industrial Production Global measures of economic activity for the Global measures of economic activity for the closing months of 2010 was surprisingly positive, and seems to have carried over into early 2011 and seems to have carried over into early 2011. 4
Industrial Production - Emerging versus Developed Economies versus Developed Economies While developed economies are improving, emerging economies continue to out-perform economies continue to out-perform. Industrial production: Aug 2007 = 100 Developed world Emerging world 160 140 120 100 100 80 60 Dec-06 Dec-08 Dec-06 Dec-08 Dec-10 US US Japan Japan Euro area Euro area China India Brazil Sources: OECD Main Economic Indicators, CEIC, NAB 5
China’s Economy All i di All indications are that Chinese economic growth ti th t Chi i th remained strong through the final months of 2010. China - Real GDP China - Consumer Prices Percentage change % % % % % Six-month-ended-annualised growth % Year-ended 9 9 12 12 6 6 6 6 3 3 8 8 0 0 Quarterly 4 4 Monthly growth -3 -3 0 0 -6 -6 2000 2002 2004 2006 2008 2010 2004 2005 2006 2007 2008 2009 2010 2011 Source: CEIC Database, NAB Source: CEIC Database, NAB 6
China’s Housing & Construction Sectors Last May alone average house price (70 large cities) Last May alone, average house price (70 large cities) rose 12.4%, prompting the introduction of various measures to cool the market. But, prices still rose 6.4% in December. o coo e a e u , p ces s ose 6 % ece be China - 70-cities House Price Index China - Construction Sector Percentage change Floor space, sq metres Floor space sq metres % 105 Mn % Mn New buildings construction Dwelling sales* Year-ended (lhs) 160 90 12 3 Monthly Monthly Total Total Year-ended, median 140 75 (lhs) 2 8 120 60 4 1 100 45 Residential 80 30 0 0 0 0 3-month 3 month moving average Monthly 60 15 (rhs) 2004 2006 2008 2010 2004 2006 2008 2010 -4 -1 * Includes only new dwellings (pre-sales or completed). 2005 2006 2007 2008 2009 2010 Source: CEIC, NAB 7
Why China & India are so important y p Industrialisation and urbanisation in China and India are following a familiar path Relative Economic Development GDP per capita relative to advanced economies, equivalent prices p p q p % % Australia 80 80 Japan 60 60 South Korea 40 40 China 20 20 20 20 India 0 0 1950 1950 1960 1960 1970 1970 1980 1980 1990 1990 2000 2000 Source: Maddison database 8
Global Economic Forecasts Despite the European sovereign debt crisis global growth Despite the European sovereign debt crisis, global growth will be solid in 2011, particularly in emerging markets such as China, East Asia, India & Brazil, helping the global economy as China, East Asia, India & Brazil, helping the global economy grow by over 4%. WEIGHTS 2006 2007 2008 2009 2010 (f) 2011 (f) 2012 (f) 0.21 2.7 2.0 0.0 -2.6 2.9 3.2 3.3 GDP US 0.06 2.0 2.3 -1.2 -6.3 4.0 1.7 2.3 GDP JAPAN 0.152 0 152 3.1 3 1 2 7 2.7 0 3 0.3 -4.0 4 0 1 7 1.7 1 5 1.5 1 8 1.8 EURO GDP EURO GDP UK GDP 0.031 2.9 2.7 0.0 -5.0 1.4 2.1 2.2 0.042 5.6 6.0 3.2 0.5 7.0 5.5 5.0 nonjap asia latin american 4 0.085 5.3 5.4 4.3 -2.1 7.4 5.6 5.3 china 0.125 0.125 12.7 12.7 14.2 14.2 9.6 9.6 9.1 9.1 10.3 10.3 9.1 9.1 8.0 8.0 0.018 2.9 2.5 0.4 -2.6 3.0 2.5 2.6 canada India 0.051 9.9 9.3 7.3 6.8 9.0 8.4 7.4 0.024 6.1 6.3 5.5 2.1 5.0 5.5 5.8 Africa CIS 0.043 8.2 8.6 5.5 -6.6 4.2 4.7 4.6 0.035 6.7 5.7 3.0 -3.7 4.2 3.6 4.0 E Europe Middle East 0.05 5.7 5.9 5.1 2.4 3.9 4.6 4.7 0.073 4.5 4.7 1.7 -1.1 4.6 5.6 3.8 Other advanced 5.4 5.4 2.9 -0.7 4.9 4.5 4.2 GLOBAL TOTAL 0.999 9
Australian Economy Australian Economy
Australian Economy - The story so far Australia’s now-20 year economic expansion is Australia s now-20 year economic expansion is without rival in our modern economic history. 11
Business Confidence Business confidence rebounded strongly in January and Business confidence rebounded strongly in January and February as the flood crisis receded. The sense of relief was strongest in Queensland was strongest in Queensland. Business confidence (net balance) 20 20 0 -20 1990s recession -40 Feb 08 Aug 08 Feb 09 Aug 09 Feb 10 Aug 10 Feb 11 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Seasonally adjusted Trend 12
Business Conditions Business conditions tumbled nationally in January, pulled Business conditions tumbled nationally in January pulled down by the severity of the Queensland floods. Conditions improved in February but remain poor improved in February but remain poor. Business conditions components (net bal. s.a.) 40 Trading Trading Profitability Profitability Employment Employment 20 0 -20 1990s recession -40 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 13
Business Conditions by State WA still strong; Qld and Tas disappoint Conditions fell WA still strong; Qld and Tas disappoint. Conditions fell heavily in Queensland, and also in Tasmania, Victoria, SA and WA but rose modestly in NSW SA and WA, but rose modestly in NSW. 40 40 40 20 20 20 0 0 0 -20 -20 -20 -40 -40 -40 40 -40 40 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Australia SA TAS Australia NSW VIC Australia QLD WA 14
Flood impacts in Queensland Confidence plummets in Queensland and then bounces back to new record highs. But, sales & profits still under pressure and conditions have been weak in Qld for all of 2010. Business Confidence Business Conditions Capacity Utilisation 84 20 20 20 20 82 0 0 80 78 -20 -20 76 6 -40 -40 74 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Australia Queensland Australia Queensland Australia Queensland 15
Impact of the Floods - Recovery Phase Important to understand that not just Qld affected. Important to understand that not just Qld affected Across Australia 10% of moderate-large firms reported a major disruption (30% in Qld) major disruption (30% in Qld). Extent that your losses will be covered by Insurance Change associated with the floods (per cent) None at all NSW 1-25% VIC VIC 26-50% QLD 51 75% 51-75% SA 76-100% WA Don’t know -14 -12 -10 -8 -6 -4 -2 0 Revenue Capacity utilisation 0% 10% 20% 30% 40% 16
Labour Costs Our latest business survey shows that labour costs O l t t b i h th t l b t have continued to increase, but there are signs that the growth rate may be peaking. th t b ki Costs & prices (3-mth ave, % p.a.) Labour costs (% p.a.) 8 8 & capacity utilisation (%) 6 85 6 5 83 83 4 4 4 81 2 3 79 79 0 2 77 -2 1 -4 0 75 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Labour Product price Retail price Labour costs (LHS) Cap U 12 mths ahead (RHS) 17
Unemployment Unemployment stabilises as employment slows Unemployment stabilises as employment slows. But to But to strengthen from late 2011 with unemployment to move down in 2012 to 4 ½% down in 2012 to 4 ½%. Wages currently under control but test Wages currently under control but test to come later. Australian labour market 4 6.5 3 3 6 0 6.0 2 5.5 1 5.0 0 4.5 -1 4.0 Dec-2006 Jun-2008 Dec-2009 Jun-2011 Dec-2012 Employment (12-mths-to, LHS) E l t (12 th t LHS) Unemployment rate (%, RHS) 18
Population growth and interstate migration This chart highlights some big disparities between This chart highlights some big disparities between unemployment both within and across Australian regions regions. Annual National Population Growth Annual Net Interstate Migration 500000 Flow of Flow of % persons persons 450000 Qld 40000 40000 400000 350000 350000 20000 20000 300000 WA Vic 250000 0 0 200000 SA 150000 -20000 -20000 100000 NSW 50000 -40000 -40000 0 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 0 8 8 8 8 9 9 9 9 9 0 0 0 0 0 1 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 -60000 -60000 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 1982 1987 1993 1999 2005 2010 1987 1993 1999 2004 2010 Source: ABS, NAB Group Economics Net Births Net Migration Source: ABS, NAB Group Economics 19
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