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Australia’s economy shifting gears
December 2012
James Shugg
Senior Economist
Australian growth mix
Consumer* Mining Business Net X GDP-2
-1
0
1
2
3
4
-2
-1
0
1
2
3
4
2012f 2013f 2014f
ppts cont' ppts cont'
Sources: ABS, Westpac Economics
contributions to GDP growthupdated: Nov ’12
* includes housing
2
Date Department Client Job No. Page ‹#›UNCLASSIFIED
When does resource CAPEX start to roll over?
Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-170
5
10
15
20
25
30
Source: Multiple company websites, Westpac Strategy GroupCurrent CAPEX profile "Worst case" CAPEX profile
A$bn/ qtr
A$42bn difference
LNG exports: set to explode
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
Floating Qld NT
WA
Mt MtSources: BREE, Westpac Economics
16% 9% 4%
52%
50%
28%11%
10%9%
Lift-offIn 2015
4
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Consumer sentiment –long period of weakness
10/01/198811/01/198812/01/198801/01/198902/01/198903/01/198904/01/198905/01/198906/01/198907/01/198908/01/198909/01/198910/01/198911/01/198912/01/198901/01/199002/01/199003/01/199004/01/199005/01/199006/01/199007/01/199008/01/199009/01/199010/01/199011/01/199012/01/199001/01/199102/01/199103/01/199104/01/199105/01/199106/01/199107/01/199108/01/199109/01/199110/01/199111/01/199112/01/199101/01/199202/01/199203/01/199204/01/199205/01/199206/01/199207/01/199208/01/199209/01/199210/01/199211/01/199212/01/199201/01/199302/01/199303/01/199304/01/199305/01/199306/01/199307/01/199308/01/199309/01/199310/01/199311/01/199312/01/199301/01/199402/01/199403/01/199404/01/199405/01/199406/01/199407/01/199408/01/199409/01/199410/01/199411/01/199412/01/199401/01/199502/01/199503/01/199504/01/199505/01/199506/01/199507/01/199508/01/199509/01/199510/01/199511/01/199512/01/199501/01/199602/01/199603/01/199604/01/199605/01/199606/01/199607/01/199608/01/199609/01/199610/01/199611/01/199612/01/199601/01/199702/01/199703/01/199704/01/199705/01/199706/01/199707/01/199708/01/199709/01/199710/01/199711/01/199712/01/199701/01/199802/01/199803/01/199804/01/199805/01/199806/01/199807/01/199808/01/199809/01/199810/01/199811/01/199812/01/199801/01/199902/01/199903/01/199904/01/199905/01/199906/01/199907/01/199908/01/199909/01/199910/01/199911/01/199912/01/199901/01/200002/01/200003/01/200004/01/200005/01/200006/01/200007/01/200008/01/200009/01/200010/01/200011/01/200012/01/200001/01/200102/01/200103/01/200104/01/200105/01/200106/01/200107/01/200108/01/200109/01/200110/01/200111/01/200112/01/200101/01/200202/01/200203/01/200204/01/200205/01/200206/01/200207/01/200208/01/200209/01/200210/01/200211/01/200212/01/200201/01/200302/01/200303/01/200304/01/200305/01/200306/01/200307/01/200308/01/200309/01/200310/01/200311/01/200312/01/200301/01/200402/01/200403/01/200404/01/200405/01/200406/01/200407/01/200408/01/200409/01/200410/01/200411/01/200412/01/200401/01/200502/01/200503/01/200504/01/200505/01/200506/01/200507/01/200508/01/200509/01/200510/01/200511/01/200512/01/200501/01/200602/01/200603/01/200604/01/200605/01/200606/01/200607/01/200608/01/200609/01/200610/01/200611/01/200612/01/200601/01/200702/01/200703/01/200704/01/200705/01/200706/01/200707/01/200708/01/200709/01/200710/01/200711/01/200712/01/200701/01/200802/01/200803/01/200804/01/200805/01/200806/01/200807/01/200808/01/200809/01/200810/01/200811/01/200812/01/200801/01/200902/01/200903/01/200904/01/200905/01/200906/01/200907/01/200908/01/200909/01/200910/01/200911/01/200912/01/200901/01/201002/01/201003/01/201004/01/201005/01/201006/01/201007/01/201008/01/201009/01/201010/01/201011/01/201012/01/201001/01/201102/01/201103/01/201104/01/201105/01/201106/01/201107/01/201108/01/201109/01/201110/01/201111/01/201112/01/201101/01/201202/01/201203/01/201204/01/201205/01/201206/01/201207/01/201208/01/201209/01/201210/01/201211/01/201212/01/201260
70
80
90
100
110
120
130
60
70
80
90
100
110
120
130 indexindex
Sources: Melbourne Insti-tute, Westpac Economics
long run average
periods with 4 or more consecutive sub-100 reads
months: 57 4 16 4 8
5
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Consumer sentiment: housing improves
Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13-80
-60
-40
-20
0
20
40
60
80
100
0
5
10
15
20
25
30
35
40
45
'time to buy a dwelling'*
house price expectations^
index %
Sources: Melbourne Institute, Morgage Choice, Westpac Economics
*seasonally adjusted, deviation from long run avg; ^net % expecting prices to rise
6
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Auction clearance rates recover
Apr-93May-93Jun-93Jul-93Aug-93Sep-93Oct-93Nov-93Dec-93Jan-94Feb-94Mar-94Apr-94May-94Jun-94Jul-94Aug-94Sep-94Oct-94Nov-94Dec-94Jan-95Feb-95Mar-95Apr-95May-95Jun-95Jul-95Aug-95Sep-95Oct-95Nov-95Dec-95Jan-96Feb-96Mar-96Apr-96May-96Jun-96Jul-96Aug-96Sep-96Oct-96Nov-96Dec-96Jan-97Feb-97Mar-97Apr-97May-97Jun-97Jul-97Aug-97Sep-97Oct-97Nov-97Dec-97Jan-98Feb-98Mar-98Apr-98May-98Jun-98Jul-98Aug-98Sep-98Oct-98Nov-98Dec-98Jan-99Feb-99Mar-99Apr-99May-99Jun-99Jul-99Aug-99Sep-99Oct-99Nov-99Dec-99Jan-00Feb-00Mar-00Apr-00May-00Jun-00Jul-00Aug-00Sep-00Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13May-13-3
-2
-1
0
1
2
3
-3
-2
-1
0
1
2
3Sydney (14%) Melbourne (20%) Brisbane (2.5%)
st. devns st. devns
Sources: RP Data-Rismark, Westpac Economics
*seas. adjusted by Westpac, smoothed, std. devns from long run average; figures show avg proportion of properties sold via auction (i.e. vs private treaty)
7
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Annual jobs growth by sector to Sept. qtr
ConstructionGovernment
RetailWholesale & trans
Leisure & hospitalityManufacturing
FinanceReal Estate
Other business servicesProf & technical
Mining, ag & utiltiesEducation & health
-80 -60 -40 -20 0 20 40 60 80 100
Sep-12
‘000 change in employment
Sources: ABS, West-pac Economics
8
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Including bonuses, wage rates have pulled back
Sep-00
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
2
3
4
5
2
3
4
5
Private sector WPI (ex bonuses)
Private sector WPI including bonuses, nsa
%yr %yr
Sources: ABS, Westpac Economics
9
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Private WPI; WA is main source of pressure
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
1
2
3
4
5
6
7
1
2
3
4
5
6
7
Vic WA NSWQld
% ann % ann
Sources: ABS, Westpac Economicsnsa
10
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Job ads suggest employment growth to slow
Oct-87 Oct-92 Oct-97 Oct-02 Oct-07 Oct-12-80
-60
-40
-20
0
20
40
60
80
-5
-4
-3
-2
-1
0
1
2
3
4
5
Total job ads trend - adv 7mths (lhs)Employment trend (rhs)
%yr %yrSources: ABS, ANZ, Westpac Economics
Total ads derived prior to Jul-99 by applying %mth growth rates of newspaper ads
11
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Unemployment likely to move higher
Nov-87Dec-87Jan-88Feb-88Mar-88Apr-88May-88Jun-88Jul-88Aug-88Sep-88Oct-88Nov-88Dec-88Jan-89Feb-89Mar-89Apr-89May-89Jun-89Jul-89Aug-89Sep-89Oct-89Nov-89Dec-89Jan-90Feb-90Mar-90Apr-90May-90Jun-90Jul-90Aug-90Sep-90Oct-90Nov-90Dec-90Jan-91Feb-91Mar-91Apr-91May-91Jun-91Jul-91Aug-91Sep-91Oct-91Nov-91Dec-91Jan-92Feb-92Mar-92Apr-92May-92Jun-92Jul-92Aug-92Sep-92Oct-92Nov-92Dec-92Jan-93Feb-93Mar-93Apr-93May-93Jun-93Jul-93Aug-93Sep-93Oct-93Nov-93Dec-93Jan-94Feb-94Mar-94Apr-94May-94Jun-94Jul-94Aug-94Sep-94Oct-94Nov-94Dec-94Jan-95Feb-95Mar-95Apr-95May-95Jun-95Jul-95Aug-95Sep-95Oct-95Nov-95Dec-95Jan-96Feb-96Mar-96Apr-96May-96Jun-96Jul-96Aug-96Sep-96Oct-96Nov-96Dec-96Jan-97Feb-97Mar-97Apr-97May-97Jun-97Jul-97Aug-97Sep-97Oct-97Nov-97Dec-97Jan-98Feb-98Mar-98Apr-98May-98Jun-98Jul-98Aug-98Sep-98Oct-98Nov-98Dec-98Jan-99Feb-99Mar-99Apr-99May-99Jun-99Jul-99Aug-99Sep-99Oct-99Nov-99Dec-99Jan-00Feb-00Mar-00Apr-00May-00Jun-00Jul-00Aug-00Sep-00Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13-200
-100
0
100
200
300
400
80
100
120
140
160
180
200annual change in unemployment rate smoothed (lhs)unemployment expectations trend (rhs)
indexbps
Sources: Westpac-MI
unemployment rising
unemployment falling
12
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Interest rate forecasts
0
2
4
6
8
10
12
0
2
4
6
8
10
12standard variable mortgage ratecash rateSeries5
% %
Sources: RBA, Westpac
f'cast
10yr avg
13
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Oct-01Nov-01Nov-01Dec-01Dec-01Jan-02Jan-02Feb-02Feb-02Mar-02Mar-02Mar-02Apr-02Apr-02May-02May-02Jun-02Jun-02Jul-02Jul-02Aug-02Aug-02Aug-02Sep-02Sep-02Oct-02Oct-02Nov-02Nov-02Dec-02Dec-02Jan-03Jan-03Jan-03Feb-03Feb-03Mar-03Mar-03Apr-03Apr-03May-03May-03Jun-03Jun-03Jul-03Jul-03Aug-03Aug-03Aug-03Sep-03Sep-03Oct-03Oct-03Nov-03Nov-03Dec-03Dec-03Jan-04Jan-04Jan-04Feb-04Feb-04Mar-04Mar-04Apr-04Apr-04May-04May-04Jun-04Jun-04Jul-04Jul-04Jul-04Aug-04Aug-04Sep-04Sep-04Oct-04Oct-04Nov-04Nov-04Dec-04Dec-04Dec-04Jan-05Jan-05Feb-05Feb-05Mar-05Mar-05Apr-05Apr-05May-05May-05Jun-05Jun-05Jul-05Jul-05Jul-05Aug-05Aug-05Sep-05Sep-05Oct-05Oct-05Nov-05Nov-05Dec-05Dec-05Dec-05Jan-06Jan-06Feb-06Feb-06Mar-06Mar-06Apr-06Apr-06May-06May-06Jun-06Jun-06Jun-06Jul-06Jul-06Aug-06Aug-06Sep-06Sep-06Oct-06Oct-06Nov-06Nov-06Dec-06Dec-06Dec-06Jan-07Jan-07Feb-07Feb-07Mar-07Mar-07Apr-07Apr-07May-07May-07Jun-07Jun-07Jun-07Jul-07Jul-07Aug-07Aug-07Sep-07Sep-07Oct-07Oct-07Nov-07Nov-07Nov-07Dec-07Dec-07Jan-08Jan-08Feb-08Feb-08Mar-08Mar-08Apr-08Apr-08May-08May-08Jun-08Jun-08Jun-08Jul-08Jul-08Aug-08Aug-08Sep-08Sep-08Oct-08Oct-08Oct-08Nov-08Nov-08Dec-08Dec-08Jan-09Jan-09Feb-09Feb-09Mar-09Mar-09Apr-09Apr-09May-09May-09May-09Jun-09Jun-09Jul-09Jul-09Aug-09Aug-09Sep-09Sep-09Oct-09Oct-09Oct-09Nov-09Nov-09Dec-09Dec-09Jan-10Jan-10Feb-10Feb-10Mar-10Mar-10Apr-10Apr-10Apr-10May-10May-10Jun-10Jun-10Jul-10Jul-10Aug-10Aug-10Sep-10Sep-10Sep-10Oct-10Oct-10Nov-10Nov-10Dec-10Dec-10Jan-11Jan-11Feb-11Feb-11Mar-11Mar-11Apr-11Apr-11Apr-11May-11May-11Jun-11Jun-11Jul-11Jul-11Aug-11Aug-11Sep-11Sep-11Sep-11Oct-11Oct-11Nov-11Nov-11Dec-11Dec-11Jan-12Jan-12Feb-12Feb-12Mar-12Mar-12Mar-12Apr-12Apr-12May-12May-12Jun-12Jun-12Jul-12Jul-12Aug-12Aug-12Aug-12Sep-12Sep-12Oct-12Oct-12Nov-12Nov-12Dec-12Dec-12Jan-13Jan-13Feb-13Feb-13Mar-13Mar-13Mar-13Apr-13Apr-13May-13May-13Jun-13Jun-13Jul-13Jul-13Aug-13Aug-13Aug-13Sep-13Sep-13Oct-13Oct-13Nov-13Nov-13Dec-13Dec-13Jan-14Jan-14Jan-14Feb-14Feb-14Mar-14Mar-14Apr-14Apr-14May-14May-14Jun-14Jun-14Jul-14Jul-14Aug-14Aug-14Aug-14Sep-14Sep-14Oct-14Oct-14Nov-14Nov-14Dec-14Dec-14Jan-15Jan-15Jan-15Feb-15Feb-15Mar-15Mar-15Apr-15Apr-15May-15May-15Jun-15Jun-15Jul-15Jul-15Jul-15Aug-15Aug-15Sep-15Sep-15Oct-15Oct-15Nov-15Nov-15Dec-15Dec-15Jan-16Jan-16Jan-16Feb-16Feb-16Mar-16Mar-16Apr-16Apr-16May-16May-16Jun-16Jun-16Jul-16Jul-16Jul-16Aug-16Aug-16Sep-16Sep-16Oct-16Oct-16Nov-16Nov-16Dec-16Dec-16Dec-162
3
4
5
6
7
8
9
2
3
4
5
6
7
8
9
Cash rate
implied by mkt forecast
% %Sources: RBA, Factset, Westpac Economics
weekly average
updated Oct 2012
Market expects rates at record low for years
14
Date Department Client Job No. Page ‹#›UNCLASSIFIED
World growth – Asia supports recovery in 2013
2009 2010 2011 2012f 2013f
World –0.6 5.3 3.9 2.9 3.6
US –3.5 3.0 1.8 2.2 1.8
Euro –4.2 1.8 1.5 –0.6 –0.4
Japan –5.5 4.8 –0.7 2.4 1.5
China 9.6 10.4 9.3 7.8 8.7
India 6.4 8.9 7.5 5.6 7.4
Other Asia 0.5 7.8 4.2 3.6 4.8
Australia 1.4 2.5 2.1 3.5 3.2
15
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Terms of trade & TWI
Jun-80Sep-80Dec-80Mar-81Jun-81Sep-81Dec-81Mar-82Jun-82Sep-82Dec-82Mar-83Jun-83Sep-83Dec-83Mar-84Jun-84Sep-84Dec-84Mar-85Jun-85Sep-85Dec-85Mar-86Jun-86Sep-86Dec-86Mar-87Jun-87Sep-87Dec-87Mar-88Jun-88Sep-88Dec-88Mar-89Jun-89Sep-89Dec-89Mar-90Jun-90Sep-90Dec-90Mar-91Jun-91Sep-91Dec-91Mar-92Jun-92Sep-92Dec-92Mar-93Jun-93Sep-93Dec-93Mar-94Jun-94Sep-94Dec-94Mar-95Jun-95Sep-95Dec-95Mar-96Jun-96Sep-96Dec-96Mar-97Jun-97Sep-97Dec-97Mar-98Jun-98Sep-98Dec-98Mar-99Jun-99Sep-99Dec-99Mar-00Jun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12Jun-12Sep-12Dec-12Mar-13Jun-13Sep-13Dec-1380
100
120
140
160
180
30
50
70
90
110
130
150
Real TWI (lhs) Terms of trade (rhs)
index indexSources: ABS, RBA, Westpac Economics
16
Date Department Client Job No. Page ‹#›UNCLASSIFIED
The Australian dollar now overvalued
Jan-91Feb-91Mar-91Apr-91May-91Jun-91Jul-91Aug-91Sep-91Oct-91Nov-91Dec-91Jan-92Feb-92Mar-92Apr-92May-92Jun-92Jul-92Aug-92Sep-92Oct-92Nov-92Dec-92Jan-93Feb-93Mar-93Apr-93May-93Jun-93Jul-93Aug-93Sep-93Oct-93Nov-93Dec-93Jan-94Feb-94Mar-94Apr-94May-94Jun-94Jul-94Aug-94Sep-94Oct-94Nov-94Dec-94Jan-95Feb-95Mar-95Apr-95May-95Jun-95Jul-95Aug-95Sep-95Oct-95Nov-95Dec-95Jan-96Feb-96Mar-96Apr-96May-96Jun-96Jul-96Aug-96Sep-96Oct-96Nov-96Dec-96Jan-97Feb-97Mar-97Apr-97May-97Jun-97Jul-97Aug-97Sep-97Oct-97Nov-97Dec-97Jan-98Feb-98Mar-98Apr-98May-98Jun-98Jul-98Aug-98Sep-98Oct-98Nov-98Dec-98Jan-99Feb-99Mar-99Apr-99May-99Jun-99Jul-99Aug-99Sep-99Oct-99Nov-99Dec-99Jan-00Feb-00Mar-00Apr-00May-00Jun-00Jul-00Aug-00Sep-00Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13May-13Jun-13Jul-13Aug-13Sep-13Oct-13Nov-13Dec-130.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
AUD/USD actual
Model estimate
USD USDSource: Westpac Economics.
Includes coal, exchanged traded commodities, relative yield curve, a risk proxy and net foreign debt to GDP.
17
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Conclusions
• Headwinds on Australia include fiscal; AUD; rates 65 bp’s below neutral.
• RBA plan – fill mining gap without inflation – scope to succeed.
• Sydney house prices look attractive
• AUD and commodities to strengthen in 2013.H1.
• US and ECB QE to help AUD and commodities.
• Case for more rate cuts still strong.
18
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DisclaimerDisclaimerDate Department Client Job No. Page ‹#›UNCLASSIFIED
Investor housing yields vs mortgage rates
03/01/1993
06/01/1993
09/01/1993
12/01/1993
03/01/1994
06/01/1994
09/01/1994
12/01/1994
03/01/1995
06/01/1995
09/01/1995
12/01/1995
03/01/1996
06/01/1996
09/01/1996
12/01/1996
03/01/1997
06/01/1997
09/01/1997
12/01/1997
03/01/1998
06/01/1998
09/01/1998
12/01/1998
03/01/1999
06/01/1999
09/01/1999
12/01/1999
03/01/2000
06/01/2000
09/01/2000
12/01/2000
03/01/2001
06/01/2001
09/01/2001
12/01/2001
03/01/2002
06/01/2002
09/01/2002
12/01/2002
03/01/2003
06/01/2003
09/01/2003
12/01/2003
03/01/2004
06/01/2004
09/01/2004
12/01/2004
03/01/2005
06/01/2005
09/01/2005
12/01/2005
03/01/2006
06/01/2006
09/01/2006
12/01/2006
03/01/2007
06/01/2007
09/01/2007
12/01/2007
03/01/2008
06/01/2008
09/01/2008
12/01/2008
03/01/2009
06/01/2009
09/01/2009
12/01/2009
03/01/2010
06/01/2010
09/01/2010
12/01/2010
03/01/2011
06/01/2011
09/01/2011
12/01/2011
03/01/2012
06/01/2012
09/01/2012
12/01/2012
03/01/2013
06/01/2013
09/01/2013
12/01/2013
3
4
5
6
7
8
9
10
11
12
3
4
5
6
7
8
9
10
11
12Series2
Sydney
%pa%pa
Sources: REIA, Westpac Economics
*median rent on 2bdrm unit as % of median unit price
investorhousing
boom
variable mort-gage rate
3yr fixed rate
20
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Dwelling prices: Sydney vs Melbourne
Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13May-13Jun-1360
80
100
120
140
160
180
200
60
80
100
120
140
160
180
200Sydney Melbourne
index index
Sources: RP Data-Rismark, Westpac Economics
*all dwellings, Dec 2002 = 100
+30%
+78%
21
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Auction clearance rates recover
Apr-93May-93Jun-93Jul-93Aug-93Sep-93Oct-93Nov-93Dec-93Jan-94Feb-94Mar-94Apr-94May-94Jun-94Jul-94Aug-94Sep-94Oct-94Nov-94Dec-94Jan-95Feb-95Mar-95Apr-95May-95Jun-95Jul-95Aug-95Sep-95Oct-95Nov-95Dec-95Jan-96Feb-96Mar-96Apr-96May-96Jun-96Jul-96Aug-96Sep-96Oct-96Nov-96Dec-96Jan-97Feb-97Mar-97Apr-97May-97Jun-97Jul-97Aug-97Sep-97Oct-97Nov-97Dec-97Jan-98Feb-98Mar-98Apr-98May-98Jun-98Jul-98Aug-98Sep-98Oct-98Nov-98Dec-98Jan-99Feb-99Mar-99Apr-99May-99Jun-99Jul-99Aug-99Sep-99Oct-99Nov-99Dec-99Jan-00Feb-00Mar-00Apr-00May-00Jun-00Jul-00Aug-00Sep-00Oct-00Nov-00Dec-00Jan-01Feb-01Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13May-13-3
-2
-1
0
1
2
3
-3
-2
-1
0
1
2
3Sydney (14%) Melbourne (20%) Brisbane (2.5%)
st. devns st. devns
Sources: RP Data-Rismark, Westpac Economics
*seas. adjusted by Westpac, smoothed, std. devns from long run average; figures show avg proportion of properties sold via auction (i.e. vs private treaty)
22
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Westpac mortgage arrears – QLD is risky
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
NSW/ACT
VIC/TAS
QLD
WA
% %
Sources: Westpac Economics
* 90+ day delinquencies
23
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Residential real estate listings – QLD oversupply
capitals Syd Melb Bris current 2007-080
2
4
6
8
10
12
14
16
0
2
4
6
8
10
12
14
16months' of supply*
%%
Sources: RP Data, ABS, NAR, US Census Bureau, CoreLogic, Westpac Economics
Australia US
* at current sales pace
long run avg
including estimated ‘shadow inventory’ of prop-erties still in foreclosure process
24
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Dwelling completions: NSW vs Vic
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
0
5
10
15
20
25
0
5
10
15
20
25NSW Vic
% %
Sources: ABS, Westpac Economics
*total completions since Dec 2002, % of stock
13%
22%
25
Date Department Client Job No. Page ‹#›UNCLASSIFIED
New dwelling construction –Vic. looks very heavy
Jun-05 Jun-0950
70
90
110
130
150
NSW Vic Tas
indexSources: ABS, Westpac Economics
Jun-05 Jun-0950
70
90
110
130
150
WA Qld SA
indexMar ’08 = 100
26
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Tas SA Vic NSW Qld WA Aus0
1
2
3
4
5
6
7
0.1
1.0
1.9 2.0
1.4
4.3
2.1
0.2
2.32.7 2.6
1.0
4.0
2.4
0.5
2.1 2.3 2.4
4.0
6.7
3.4
2009/10 2010/11 2011/12
% chgSources: ABS, Westpac Economics
Economic growth: state by stateDate Department Client Job No. Page ‹#›UNCLASSIFIED
Business investment: by state
Jun-91 Jun-99 Jun-070
4
8
12
16
20
NSW + Vic
WA + Qld
$bn Equipment
’03/04 to ’07/08
Jun-91 Jun-99 Jun-070
4
8
12
16
20
NSW + Vic
WA + Qld
$bnConstruction
Sources: ABS, Westpac Economics
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Domestic demand: state view
Jun-96 Jun-02 Jun-08-6
-3
0
3
6
9
12
NSW Vic
% annSources: ABS, Westpac Economics 2qtr avg
Jun-96 Jun-02 Jun-08-9
-6
-3
0
3
6
9
12
15
18
WA Qld
% ann
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Consumer spend: diverge
Jun-92
Sep-92
Dec-92
Mar-93
Jun-93
Sep-93
Dec-93
Mar-94
Jun-94
Sep-94
Dec-94
Mar-95
Jun-95
Sep-95
Dec-95
Mar-96
Jun-96
Sep-96
Dec-96
Mar-97
Jun-97
Sep-97
Dec-97
Mar-98
Jun-98
Sep-98
Dec-98
Mar-99
Jun-99
Sep-99
Dec-99
Mar-00
Jun-00
Sep-00
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
-2
0
2
4
6
8
10
12
-2
0
2
4
6
8
10
12
South East * Qld, WA, NT
% ann % ann
Sources: ABS, Westpac Economics
latest 6mths(annualised)
* NSW, Vic, SA, Tas, ACT
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Established house prices stabilise
Jun-00 Jun-08-20
-10
0
10
20
30
40
50
Sydney
Melbourne
% ann
Sources: ABS, Westpac Economics
Jun-00 Jun-08-20
-10
0
10
20
30
40
50
Brisbane
Perth
% ann
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Employment by state
Aug-07 Aug-10-4
-2
0
2
4
6
8NSW Vic
% chg
Sources: ABS, Westpac Economics
6mth, annualised* smoothed
Aug-07 Aug-10-4
-2
0
2
4
6
8Qld WA
% chg
Date Department Client Job No. Page ‹#›UNCLASSIFIED
Non-residential construction pipeline
Jun-91 Jun-99 Jun-070
2
4
6
8
10
South-east
Qld, WA, NT
$bn Non-res. building
Approvals qtrly
Public worksboost
Mar-91 Mar-99 Mar-070
20
40
60
80
100
120
140
South-east
Qld, WA, NT
$bnInfrastructure
Work Yet to be Done
Sources: ABS, Westpac Economics
Date Department Client Job No. Page ‹#›UNCLASSIFIED