Commonweath Bank Global Market Research - Economics: Perspective

download Commonweath Bank Global Market Research  - Economics: Perspective

of 25

Transcript of Commonweath Bank Global Market Research - Economics: Perspective

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    1/25

    Economics: Perspective16 September 2011

    Michael Blythe Chief Economist T. +612 9118 1101 E. [email protected] McIntyre Economist T. +612 9118 1100 E. [email protected] Capurso Currency Strategist T. +612 9118 1106 E. [email protected]

    Peter Dragicevich FX Economist T. +612 9118 1107 E. [email protected] Tennent-Brown FX Economist T. +612 9117 1378 E. [email protected]

    Important Disclosures and analyst certifications regarding subject companies are in the Disclosure and Disclaimer Appendix of this document and atww.research.commbank.com.au. This report is published, approved and distributed by Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945.

    The Week Ahead

    Concerns in Europe remain. Markets remain volatile, driven by headlines and sentiment.

    The FOMC meets on Wednesday. Further policy easing measures are expected. Operation Twist is the likely option.

    RBA meeting minutes are released on Tuesday. New Zealand QII GDP, released Thursday, to show modest growth.

    Financial markets remain volatile. Headlines are driving market direction, fundamentals are taking a back seat. This wasparticularly evident in the past week. The already fragile markets were rocked early in the week by the news ECBExecutive Board Member Stark, a somewhat reluctant supporter of the ECBs recent policy decisions, had resigned.Adding to the poor sentiment, European sovereign debt issues continue to play out. Greek bond yields remain historicallyhigh. Expectations of a near-term default are building. Two-year Greek yields reached astronomical highs early in theweek, hovering around 70%. In an effort to ease anxiety, French President Sarkozy and German Chancellor Merkelreiterated their support for Greece to remain a part of the Euro, and for the assistance measures pledged in July. In turn,Prime Minister Papandreou stressed Greece remains committed to meeting its deficit reduction targets. In combination

    the moves boosted market confidence that the Troika (EU/ECB/IMF) would approve the next tranche of Greecesassistance package in the coming weeks.

    While Greece remains an obvious focus, the negative impact on the banking system is a developing concern. Somemeasures of funding stress in the European banking system remain near levels last witnessed in late 2008. In an effort toalleviate some of the stress, the ECB, in conjunction with the Bank of England (BoE), US Federal Reserve, Bank of Japan,and Swiss National Bank, announced that they would offer European banks three-month USD liquidity to ensure that thebanks have enough USD funding through year-end. Risk sentiment was further boosted by this coordinated and pro-active approach taken by the major global central banks. But some participants remain wary of how long this sentimentwill last. Underlying issues in the Eurozone remain. The EU Finance ministers and Central Bankers meeting in Poland overthe weekend is likely to be a key driver of market sentiment early next week.

    The key focus of markets next week will be Wednesdays US Federal Open Market Committee (FOMC) meeting (Thursdaymorning Australian time). The move by the FOMC to expand the meeting to a two day affair, when coupled with the recent

    deterioration in the US economic data, has raised expectations of further policy easing measures. We expect the FOMCto announce Operation Twist, which is a move by the Fed to run down its short-term US Treasury holdings and buylong-term Treasuries. Significantly, this process does not increase the size of the Feds balance sheet. Further expansionof the Feds balance sheet, via an additional round of asset purchases, appears some way off given the lift in US inflationand the vocal dissenters on the FOMC. Our Currency Strategist, Joseph Capurso, provides further detail on OperationTwist from page two. In addition to the FOMC, the BoE releases the minutes of the September Monetary PolicyCommittee (MPC) meeting on Wednesday. Given the weakness in the UK and European economies, a move to an evenmore dovish slant by the MPC would not be a surprise.

    Closer to home, the minutes of the September Reserve Bank of Australia (RBA) meeting will be released on Tuesday. Theminutes are likely to provide further detail on the RBAs thinking on the recent global events and where the risks to thedomestic economy reside. We still expect the next move by the RBA to be a hike in February 2012, but given theuncertainty in global markets the risk of an extended pause cannot be discounted. In addition, the announced changes to

    the CPI are also likely to remove some of the pressure for the RBA to hike rates. Seasonal adjustments undertaken by theABS have lowered the QII underlying inflation prints. Our Chief Economist, Michael Blythe, examines the changes to theCPI from page five. Further changes to the CPI will be announced on 22 September. Furthermore, it is undisputable thatrecent natural disasters have had a negative impact on the domestic economy. Our Chief Economist also provides somecolour on just how the economy has been affected; view the results of the latest addition of the CBA Viewpointfrom pagesix.

    Across the Tasman, the decision by the Reserve Bank of New Zealand (RBNZ) to remain on hold was not surprising giventhe global uncertainties. The RBNZ also revised down its growth and inflation outlooks for the domestic economy. Whencoupled with the strong NZD and global concerns, we now expect the RBNZ to remain on hold until March 2012. NewZealand QII GDP figures are released on Thursday, we expect only modest growth. Our FX Economist, Chris Tennent-Brown, provides a preview of the QII GDP figures and a review of the RBNZ decision from page eleven.

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    2/25

    Global Markets Research

    Economics: Perspective

    2

    International Economic Perspective

    Operation Twist: Fed to introduce more policy easing

    We expect the FOMC to announce further monetary policy support at its policy meeting on 21 September.

    We expect the Fed to run down its short-term US Treasury holdings and buy long-term Treasuries, known as a twist. The effect on the USD is neutral because US two-year bond yields are likely to be unaffected.

    Come on let's twist again like we did last summer

    Yea, let's twist again like we did last yearDo you remember when things were really hummin'Yea, let's twist again, twistin' time is here

    Excerpt from The Twist, Chubby Checker, 1960

    Recent and prospective economic trends

    Since Federal Reserve chair Bernankes speech at Jackson Hole on 27August, the US economy has shown few signs of improvement.Consumer confidence has slumped and the labour market has remainedweak. One of our favourite leading indicators for the US labour market,temporary workers, suggests the weakness evident in the Augustpayrolls report has further to run. A literal reading of our indicatorsuggests payrolls may decrease in coming months. While personalspending increased smartly by 0.8% in July, it mainly reflected adrawdown of savings. This performance is unlikely to be repeated incoming months.

    We think the FOMCs forecast of core PCE inflation of 1.7%pa by theend of 2012 contain some downside risks. The US economy is weaker

    than the FOMC projected in June. We expect the Fed to revise downtheir forecasts and indicate core inflationpeakslater in 2011 and easesin 2012. In our view, an extended period of below trend economicgrowth in the US may increaseexcess capacity and bear down on futureinflation. A projection of core inflation easing below the Feds implicittolerance band of 1.7-2.0% in 2012 implies there is a case for the Fed todeliver further policy support.

    Operation Twist

    We think the US economy has deteriorated enough since the FOMCspolicy meeting in August to encourage the majority of FOMC membersto vote for further policy stimulus at its next meeting on 21 September.

    At the August meeting, there was some support within the FOMC toprovide more stimulus than what was delivered. The minutes from thatmeeting indicate the majority of members thought the decision toprovide guidance about how long the funds rate would remainunchanged was a measured response. The minutes also reveal that afew members of the FOMC felt that recent economic developmentsjustified a more substantial move.

    The FOMCs next policy meeting in September has been extended totwo days. In our view, the extension implies the FOMC will publish anew set of economic forecasts, one meeting earlier than scheduled, andthese forecasts will be published in the minutes of the meeting. We alsoexpect the FOMC to consider a wider range of policy options than thefour options considered in August.

    At the September meeting, we expect the FOMC to re-consider three ofthe four options they discussed in August.

    40

    60

    80

    100

    120

    Jan-78 Jan-85 Jan-92 Jan-99 Jan-06 Jan-13

    US CONSUMER CONFIDENCE(Universityof Michigan)

    Points

    -90

    -60

    -30

    0

    30

    60

    -900

    -600

    -300

    0

    300

    600

    Jan-96 Jan-00 Jan-04 Jan-08 Jan-12

    US LABOUR MARKET INDICATORS(3-month moving average)

    Temporary workers(Advanced 3 months,

    rhs)

    Payrolls(lhs)

    '000 '000

    0.5

    1.0

    1.5

    2.0

    2.5

    0.5

    1.0

    1.5

    2.0

    2.5

    Feb-10 Aug-10 Feb-11 Aug-11 Feb-12

    2011 2012 2013

    EVOLUTION OF FED'S FORECASTS(Core PCE inflation forecasts)

    %

    Month forecast prepared

    %

    Expectedrevisions

    2012

    2013

    2011

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    3/25

    Global Markets Research

    Economics: Perspective

    3

    Lengthen the average maturity of their securities holdings by alteringthe compositionof the balance sheet.

    Increase the sizeof its balance sheet, ie, QE3.

    Decrease the interest rate the Fed pays to banks on excess reserves.

    We also expect the FOMC to consider some creative policy options,

    such as the introduction of an explicit inflation target, price leveltargeting or targeting yields on long-term government bonds. TheFOMC may also consider linking its policy stance to inflation orunemployment rate targets.

    On balance, we expect the FOMC to lengthen the average maturity of itssecurities holdings at its September meeting. This policy, known in themarket as Operation Twist, can be implemented by the Fed replacing itsshort-term US Treasury holdings with long-term Treasuries. OperationTwist could lower long-term yields and despite some selling of shortterm securities, it would leave short-term yields unaffected. Short-termUS yields have been anchored by the FOMCs previous guidance toleave the funds rate unchanged until at least mid-2013.

    We favour Operation Twist over QE3 because it would not involveexpanding the Feds balance sheet. Operation Twist may placate thethree dissenters on the FOMC, though we do not think the dissentersare a major obstacle to further easing. We think Operation Twist woulddeliver more stimulus to the US economy than a cut to the interest ratethe Fed pays to banks on their excess reserves. We expect the FOMCis not yet willing to implement the more creative policy options notedabove, although it may consider their merits and costs at its policymeeting this month.

    Operation Twist is not without risks. The Fed already owns 18% of theUS government bonds outstanding with a maturity longer than ten years.Operation Twist would increase further the Feds ownership share oflonger term Treasuries. The higher the Feds ownership share ofTreasuries, the more difficult it will be for the Fed to reduce its exposurewithout disrupting the Treasury market when the FOMC decides toremove its policy stimulus.

    Implications for currencies

    On its own, further policy easing by the FOMC should lead to downwardpressure on US long-term bond yields. But our fixed income colleaguesbelieve much of this is already priced in and are wary that the positiveimpact on sentiment could be more powerful (as we saw with QE2).They are forecasting yields on US 10-year bonds to now remain in a 2.0-2.2% range this year. In any case, the USD is more sensitive to short-term bond yields so we do not believe there will be a major effect on the

    USD.

    The slow-down in the US economy, the convergence of European bondyields towards US yields and the re-emerging risks in Europe have madethe USD a more attractive safe-haven currency. In addition,intervention, both threatened and real, by the Swiss National Bank andthe Bank of Japan, has raised the potential risks of holding these safe-haven currencies. The USD is quickly regaining safe-haven enthusiasm,despite the problems in the US economy.

    The OIS market continues to price in rate cuts by the ECB over the nextyear. The German two-year bond yield, at 0.60%, is well below theECBs policy rate of 1.50%. Yields in Europe have converged downtowards US levels and removed an area of support for Europeancurrencies. Stresses in Europe have contributed to an increase indemand for USD. This has led us to revise our near-term currencyforecasts (please see: Foreign Exchange Strategy: Adjustments to our

    0

    10

    20

    30

    40

    50

    2011

    2013

    2015

    2017

    2019

    2021

    2023

    2025

    2027

    2029

    2031

    2033

    2035

    2037

    2039

    2041

    SHARE OF US BONDS HELD BY FED

    %

    Weightedaverage

    -90

    -60

    -30

    0

    30

    60-60

    -30

    0

    30

    60

    90

    Jan-95 Jan-99 Jan-03 Jan-07 Jan-11

    LENDING TO US CORPORATES

    Lending standards to largecorporates (lhs)

    Demand for loans from large corporates (rhs)

    pts pts

    0

    1

    2

    3

    4

    0

    1

    2

    3

    4

    Cash 2 Year 5 Year 10 Year

    YIELD CURVES(Selected economies)

    UK

    % %

    US

    Germany

    0

    150

    300

    450

    600

    0

    150

    300

    450

    600

    Jan-06 Jan-08 Jan-10 Jan-12

    BANK DEPOSITS WITH ECB

    EUR bn EUR bn

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    4/25

    Global Markets Research

    Economics: Perspective

    4

    currency forecasts, published 14 September 2011).

    These stresses in Europes banking system, particularly the scramble forUSD funding following further European bank stress and the Fedsabolishment of regulation Q, are also influencing currencies (see FXStrategy - What really cause the recent global sell-off?published 17August 2011). The three-month EUR/USD basis swap, the rate which

    floating rates are exchanged across currencies, has blown out to morethan 80 points (it had been above 100 points). The blow-out of the EURbasis swap is the largest since late 2008. European banks continue todeposit large amounts of EUR with the ECB rather than lend to otherbanks. Our indicator of inter-bank risk in Europe is near levelsexperienced in the early stages of the GFC in late 2007 and early 2008.European banks are offering rates 80bps above repo to attract cash.We believe the downside risks to EUR are rising. Consequently, we seelittle negative implication for the USD from Operation Twist. (Note: thesestresses have led to coordinated central bank efforts to provide USDfunding to European banks, as discussed on page one).

    Joseph Capurso Currency Strategist T. +612 9118 1106 E. [email protected]

    0.0

    0.5

    1.0

    1.5

    2.0

    2.5

    0.0

    0.5

    1.0

    1.5

    2.0

    2.5

    Jan-06 Jan-08 Jan-10 Jan-12

    EUROPEAN INTER-BANK RISK(3-month deposit rate minusrepo rate)

    pp pp

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    5/25

    Global Markets Research

    Economics: Perspective

    5

    Australian Economic Perspective

    Changes to the CPI

    The ABS is moving to seasonally adjust key components of the CPI.

    Underlying inflation rates over the past few years will be a little higher as a result although QII 2011 was revised down.

    A better starting point for the inflation trajectory from here will leave the RBA more comfortable with standing still.

    The ABS is working through its recent review of the Consumer Price Index as part of the process of moving from the 15thseries CPI to the 16th series. One outcome of the review is that the seasonal adjustment methodology used in producingthe underlyinginflation measures will change. Another outcome is that a seasonally-adjusted headlineCPI estimate willalso now be published. The ABS has just released a snapshot of what the current CPI readings will look like when the newsystem takes over with the release of the QIII CPI (due 26 October).

    The main changes at the headlineCPI level are:

    QI CPI growth will typically be a little lower and QIV CPI growth typically a little higher than the old data shows;

    annual growth rates will be little changed; and

    the not-seasonally-adjusted CPI will remain the official measure of inflation.

    The main changes at the underlyingCPI level are:

    the ABS will now seasonally adjust 64 of the 90 expenditure classes that make up the CPI (compared with 20 currently);

    the main impact on the RBAs preferred underlying CPI measures is to slightly lift annual growth rates relative to the oldestimates.

    One significant exception to this general pattern of revisions is the latest CPI readings for QII 2011. QII will show a smallerrise. The average rise in the trimmed mean and weighted median CPIs now stands at 0.6% (previously 0.9%).

    The big picture here is that the Australian inflation story did turn around in the first half of 2011. But the rate of deterioration

    is less marked. The fundamental factors expected to drive underlying inflation rates remain in place. So there are noimmediate implications for monetary policy. A better starting point for the inflation trajectory from here will, however, leavethe RBA more comfortable with standing still on the rates front.

    One caveat. As part of the move to the 16th series CPI the ABS will update the weights for the various expenditure classes.These revisions have the potential to further change the underlying CPI numbers. That revised weighting pattern will bereleased on 22 September.

    Michael Blythe Chief Economist T. +612 9118 1101 E. [email protected]

    0

    2

    4

    0

    2

    4

    Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12

    CONSUMER PRICES(annual % change)% %

    Old

    New

    1

    2

    3

    4

    5

    1

    2

    3

    4

    5

    Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12

    UNDERLYING CPI(6mnth ended annual rate)% %

    RBAtarget

    Old

    New

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    6/25

    Global Markets Research

    Economics: Perspective

    6

    Australian Economic Perspective

    Commonwealth Bank Viewpoint

    The impact of natural disasters on the Australian economy are more pervasive than thought.

    These disasters have weighed on sentiment and affected consumer financial perceptions.

    The latest Commonwealth Bank Viewpointexamines these issues in more detail.

    What feels like a never ending spate ofdisasters natural and manmade contributedto the dampening of global optimism evident atthe start of 2011. Floods and cyclones inAustralia, earthquakes in New Zealand,earthquakes, tsunamis and a nuclearemergency in Japan, and unrest in the MiddleEast were all unexpected and have had majoreconomic consequences. In short, they are allclassic black swan events.

    The human tragedy should always be the centreof attention. This piece, however, looks atinformation generated by the CommonwealthBanks Viewpointproject on the economicimpact of natural disasters in Australia.

    It may feel different this year because some ofthese disasters have happened on our owndoorstep. Or involve countries that areeconomically important to us. But naturaldisasters are, unfortunately, not unusual. Theorganisations that monitor such events report

    that 350-550 such disasters have occurredeach year over the past decade.

    These disasters do involve some economiccost. And the frequency of such shocks meansthat there is a certain base level of economicdamage that has to be dealt with each year.That economic damage has averaged about0.2% of global GDP per annum over the pastthirty years. Periods of peak natural disaster,such as the Kobe earthquake in 1995 andHurricane Katrina in 2005, have involved adamage bill of around 0.5% of global GDP.

    The regularity of natural disasters means thatthere is little, if any, correlation between suchevents and changes in global growth rates.This conclusion holds even in peak disasteryears. And it supports the usual rule-of-thumbthat any activity loss is largely recouped in thesubsequent rebuild.

    Current IMF projections have the globaleconomy expanding by about 4% in 2011 and2012, significantly above the long-run averageof 3%pa. Recent events will probably seethese forecasts lowered. But a disaster with aneconomic cost equal to the worst case outcome

    of the past thirty years, and the recentJapanese earthquake and tsunami will certainlyfall into that category, would still leave the

    0

    200

    400

    600

    0

    200

    400

    600

    1980 1985 1990 1995 2000 2005 2010

    NoNoNATURAL DISASTERS

    Source: EM-DAT

    0.0

    0.2

    0.4

    0.6

    0

    0.2

    0.4

    0.6

    1980 1985 1990 1995 2000 2005 2010

    %%

    Kobequake

    NATURAL DISASTERS(estimated damage, % of world GDP)

    Source:

    EM-DAT/IMF/CBA HurricaneKatrina

    Wenchuanquake

    0 6 12 18

    Maule earthquake(Chile, 2010)

    Yangtze floods(China, 1998)

    Kobe earthquake(Japan, 1995)

    Wenchuan earthquake(China, 2008)

    Hurricane Katrina(US, 2005)

    Northridge earthquake(US, 1994)

    Hurricane Ike(US, 2008)

    %

    MAJOR DISASTERS: ECONOMIC DAMAGE(% of country GDP)

    Natural disasters arenot rare.

    They do involvesome economiccost.

    The regional cost islarge but little impactis evident on globalgrowth rates.

    Natural disasters area factor depressingsentiment.

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    7/25

    Global Markets Research

    Economics: Perspective

    7

    global economy running at close to trend.

    Natural disasters have only a limited impact onglobal trends because they are local in nature.The flip side of this is that disasters can have alarge impact on the regions affected. Lookingat the worst examples of the past twenty years,

    for example, shows that Hurricane Katrinacaused economic damage equivalent to 1% ofUS GDP in 2005. And the economic damagefrom the Maule earthquake and tsunami in 2010amounted to 15% of Chilean GDP.

    The broader conclusion, however, still holds atthe regional level. The impact on economicactivity tends to be relatively shortlived.

    The top chart uses industrial production as aproxy for overall economic activity around thetime of major disasters. In some cases (eg theWenchuan quake in China in 2008) it is difficult

    to see any effect at all. In others where therewas a significant impact (eg the Kobe quake inJapan in 1995) activity was back at pre-disasterlevels within a few months. Hurricane Ike in2008 is an exception where an output recoveryfailed. The recovery phase after that disastercoincided with the onset of the global financialcrisis.

    The Australian economic story has been apretty easy one to sell over the past fewyears. Our track record is well established.And global investors are happy to acknowledgethat record. At the start of this year it lookedlike more of the same. But some of that earlieroptimism has dissipated. The economy haslost momentum and the debate about oureconomic resilience has resurfaced.

    The initial trigger was the natural disasters thathit the economy earlier in the year. In manyrespects, the impact of these disasters isplaying out in line with the global historicalexperience. There was a bigger impact onregional economies than the national economy.And recovery has been quite swift in someareas.

    Data collected as part of the Viewpointprojectillustrates the point. Salary payments into CBAaccounts are a proxy for employment andincome trends. Swift action by governmentsobviously helps. Looking at the trajectory ofthose payments around the times of variousdisasters ranging from the Victorian bushfires inearly 2009 to the Queensland floods in 2009,2010 and 2011 reveals:

    a large downturn during the disaster periodand its immediate aftermath; and

    a reasonably rapid bounce back tosomething like pre-disaster levels over a

    period of 4-8 months.

    70

    80

    90

    100

    110

    70

    80

    90

    100

    110

    -2 -1 0 1 2 3 4 5 6

    IndexIndex

    Months from disaster

    Maule quake(Chile'10)

    INDUSTRIAL PRODUCTION(month before disaster=100)

    Hurricane Ike(US'08)

    Kobe quake(Japan'95)

    Wenchuanquake

    (China'08)

    Northridgequake

    (US'94)

    Hurricane Katrina(US'05)

    90

    95

    100

    105

    90

    95

    100

    105

    Mar-08 Mar-09 Mar-10 Mar-11

    REAL GDP(Sep'08= 100)

    Index Index

    Japan

    US

    Australia

    Europe

    UK

    NZ

    Lehmancollapse

    The recovery phasetends to be relativelyrapid and compen-sates for the initial

    loss of activity.

    Australian disastershave weighed ondomestic consumersentiment.

    CBAs Viewpointproject illustrates thepoint.

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    8/25

    Global Markets Research

    Economics: Perspective

    8

    But there are also some important differencesfrom the global experience with naturaldisasters. The Queensland floods and WAcyclones, for example, had an outsized impacton two of Australias key exports coal and ironore. Disruptions to production and transportwere enough to drag the economy backwards

    in the first quarter of 2011. Nevertheless, thebroad conclusion holds good. This exportpothole will be filled in. Iron ore exports arenear normal levels and coal is on the way back.The economy will eventually reach the sameend point even though the path taken issomewhat different. A return to end 2010 coalexport levels will add ppts to GDP growth inHII 2011. This boost will be a significant offsetto whatever drag may eventuate from currentuncertainties and risks.

    The impact on sentiment is another channelthat distributes and extends the impact ofnatural disasters. The Commonwealth Banksurvey of consumer perceptions, for example,shows that the proportion of respondents whothink the economy is going downhill has sometendency to lift around major natural disasters.Very high readings were recorded after theVictorian bushfires and North Queenslandfloods in early 2009. Some impact of thesedisasters was no doubt captured in the data.But the elevated nature of these readings wasmore a reflection of the global financial crisis.

    This edition of the Commonwealth Banks

    Viewpointsurveyed households directly on theirperceptions about natural disasters. The resultssuggest again that the impact on the broadereconomy was more pervasive than first thought.

    When quizzed on whether they were affected bythe floods, the majority (64%) indicated theywere not affected. But a surprisingly highproportion of respondents indicated they wereaffected either directly (9%) or indirectly (27%).These proportions are quite high relative to theregional concentration of the disasters.

    The perceived impact on personal finances was

    greater still:

    some 45% of respondents believe thatrecent natural disasters had a negativeimpact on their personal financial situation;

    about 39% saw no impact; and

    a small proportion (about 10%) describedthe floods as having a positive impact onpersonal finances.

    One puzzling aspect of the Australian economicstory for a while now has been the reluctance of

    consumers to spend. Household abilitytospend is quite good. Incomes are growingquickly and savings are at elevated levels. Butthe appetiteto spend is missing. This lack of

    80

    90

    100

    110

    120

    80

    90

    100

    110

    120

    -6 -4 -2 0 2 4 6 8 10 12

    Index

    Month before disaster=0

    Source: CBA Viewpoint

    CBA: SALARY RECIPIENTS(disaster month=100)

    SW Qldfloods

    (Mar'10)Nth Qldfloods

    (Feb'09)

    SW Qldfloods

    (Jan'11)

    Index

    Brisbanefloods

    (Jan'11)Vic

    Bushfires(Feb'09)

    60

    80

    100

    120

    60

    80

    100

    120

    Oct 10 Feb 11 Jun 11 Oct 10 Feb 11 Jun 11

    IndexIndex

    Lump

    Iron Ore Coal

    EXPORT VOLUMES(Oct'10=100, nsa)

    FinesCoking

    Thermal

    Source: ABS

    0

    25

    50

    75

    0

    25

    50

    75

    Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul -11

    %%

    Vic bushfires/NQ Qld floods

    Source: CBA Viewpoint

    CBA: CONSUMER PERCEPTIONS(% seeing economy going downhill)

    SW Qldfloods

    SW Qld/Brisbane

    floods

    A return to end 2010coal export levelswill add ppts toGDP growth in HII

    2011.

    A surprisingly largeshare of thepopulation believesthey have beenaffected by naturaldisasters.

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    9/25

    Global Markets Research

    Economics: Perspective

    9

    appetite is largely a reflection of concerns aboutpersonal finances. And, in turn, these concernspartly reflect the spate of natural disasters inrecent times.

    Natural disasters are not the only factorweighing on sentiment at the moment.

    Households generally are not happy. Theevidence is there in the very real fears thathouseholds have about the state of theirfinances.

    Our surveys show that most feel their personalcircumstances are worse than six months ago.And the proportion expecting someimprovement in the next six months is fallingquickly. This outcome is despite the fact thatdisposable income is growing strongly (up 7.4%over the past year)!

    The disconnect between sentiment and

    finance is surprising. Household fears aretypically financial in nature. Our surveysindicate that the greatest fears have a cashflowaspect (such as losing a job or paying themortgage) or an investment theme (such asbuilding up savings for retirement).

    Ongoing consumer restraint is a key objectivefor policy makers. Such restraint is necessaryto deal with the inflation risks and resourceallocation issues in a fully-employed economyfacing rapid income growth and an unstoppablemining boom.

    In a perverse way, the depressing influence ofnatural disasters on household sentiment earlierin the year helped. This influence will, however,wane over time. And recent global events haveinjected some additional uncertainty into thepolicy debate. But higher interest rates will berequired at some point.

    There are some indications that the impact ofearlier rate rises is starting to recede. TheCommonwealth Bank survey of consumerperceptions, for example, shows a strongcorrelation between the proportion of

    respondents who worry about housing costsand the change in the mortgage rate. Butextended pauses in the policy cycle, such as sofar in 2011, has seen these fears recede.

    While the general trend is for regionaleconomies to get back to something like pre-disaster levels reasonably quickly, theaggregate picture conceals a degree ofvariation between regions. There are somelingering after-effects from such disasters.

    Commonwealth Banks unemploymentindicators, based on Newstart data collected as

    part of the Viewpointproject, highlight theissue. All disaster-affected regions in oursurvey show an initial spike in thisunemployment indicator. But the speed of the

    0

    30

    60

    90

    120%

    IMPACT OF NATURAL DISASTERS(% of respondents)

    Affected bydisatser

    Impact onpersonalfinances

    No

    Indir-ectly

    Directly

    Negative

    Positive

    Unsure

    None

    Source: CBA Viewpoint

    60

    95

    130

    165

    200

    -16

    -8

    0

    8

    16

    Mar-90 Mar-95 Mar-00 Mar-05 Mar-10

    %pa

    Index

    Disposableincome

    (lhs)

    Consumerconfidence*

    (rhs)

    * Source: WBC/Melbourne Institute

    SENTIMENT & INCOME

    -40

    -20

    0

    20

    40

    -40

    -20

    0

    20

    40

    Apr 09 Oc t 09 Apr 10 Oc t 10 Apr 11 Oc t 11

    %%

    Better in sixmonths time

    Betterthan six

    months

    ago

    Source: CBA Viewpoint

    PERSONAL CIRCUMSTANCES(net % of respondents)

    0

    10

    20

    30

    0

    10

    20

    30

    Apr 09 Oct 09 Apr 10 Oct 10 Apr 11 Oct 11

    %%

    Unable to paymortgage/rent

    Source: CBA Viewpoint

    GREATEST FEAR(% of respondents)

    Losingjob

    Inability to providenecessities

    Investment losses

    Retirement provision Giving up luxuries

    Other factors arealso weighing on

    sentiment.

    Low sentiment levelsare contributing toconsumer caution.

    Interest rate fearsare receding a little.

    There are somelingering after-

    effects from naturaldisasters.

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    10/25

    Global Markets Research

    Economics: Perspective

    10

    subsequent pull back has varied. Based on thismetric, the aftermath of the Victorian bushfiresand the floods in North Queensland have had amore enduring impact on those regions thanother disasters.

    Various forces seem to be at work. There are,

    for example, some indications in the Viewpointdata that the cumulative effect of a series ofnatural disasters takes a toll. Successive floodsin North Queensland have contributed to moreenduring negatives in that region.

    Research by NATSEM, as discussed inViewpoint, suggests that the type of disaster isimportant in determining the impact. The rateof migration from bushfire-affected regionsexceeds that of flood-affected regions. So thepopulation outflow after the Victorian bushfiresprobably weighed on recovery in those regions.The proximity to a major centre (Melbourne) no

    doubt accentuated the shift. Flood-affectedregions in Queensland, in contrast, are furtherremoved from major centres.

    Industry structure is also important. Naturaldisasters hit hard in areas where agriculture andtourism (retail, accommodation & food) aremajor parts of the local economy.

    About Viewpoint:

    The Commonwealth Banks business generatesa vast array of data on financial transactions,savings and spending patterns. From this massof data a confidential sample of 1.3 millionconsumers has been selected that closelymatches the structure of the Australianpopulation. This sample allows us toinvestigate topical issues and track trends inincomes, spending, saving - when the economyis speeding up or slowing down.

    This hard-edged financial data is overlayed witha survey of consumer perceptions andexperiences that we run each month with over2,000 individuals.

    The report is then analysed and commented onby the independent economic research body -the National Centre for Social and EconomicModelling (NATSEM) based in the Universityof Canberra.

    The actual report can be found at:

    http://www.commbank.com.au/about-us/our-company/viewpoint/default.aspx

    Michael Blythe Chief Economist T. +612 9118 1101 E. [email protected]

    -1.0

    -0.5

    0.0

    0.5

    1.0

    12

    15

    18

    21

    24

    Apr 09 Oct 09 Apr 10 Oc t 10 Apr 11 Oct 11

    %ptsChange in

    mortgage rate(over 3 months, rhs)

    Source: CBA Viewpoint

    INTEREST RATES & "FEAR"

    Greatest fear:unable to pay

    mortgage or rent(lhs)

    % ofrespondents

    0

    60

    120

    180

    VicBushfires(Feb'09)

    N QldFloods

    (Feb'09)

    SW Qfloods

    (Mar'10)

    Brisbanefloods

    (Jan'11)

    Index

    Pre disasterDisas ter period

    Post disaster

    UNEMPLOYMENT AVERAGES(based on newstart payments)

    0

    50

    100

    150

    0

    50

    100

    150Index

    Agriculture

    SALARY RECIPIENTS BY INDUSTRY(start of d isaster=100)

    Source: CBA Viewpoint

    Retail

    Publicadmin

    Months from disaster start

    Index

    Bushfires NQ Floods SWQ FloodsVic Feb'09 Feb'09 Mar' 10

    Accom &food

    The type of disasteris important indetermining theultimate economicimpact.

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    11/25

    Global Markets Research

    Economics: Perspective

    11

    New Zealand Economic Perspective

    NZ QII growth may falter, but economy will strive on

    Economy likely grew by just 0.1% over QII, following 0.8% growth in QI.

    Underlying trend remains firm, although perhaps less upbeat than initially thought.

    RBNZ remains optimistic on the domestic growth outlook, but global risks have near-term rate hikes off the agenda.

    NZ QII GDP data are released on 22September. We expect GDP growth of just0.1% over QII, following a robust 0.8% increaseover the first quarter of 2011. The strength ofthe QI increase was particularly impressivegiven the disruption caused by the Februaryearthquake. While QI growth was led by astrong increase in manufacturing production,the GDP increase was relatively broad based(with the exception of a decline in construction).

    The result, combined with the upward revisionto QIV, revealed the economic recovery wasstronger and faster than previously thought.

    Initial indicators had pointed to growthmaintaining momentum over QII. Confidenceremained buoyant while spending data werestrong. However, more recent data haverevealed a sharper pull back in manufacturingand wholesale trade than thought. Meanwhile,further declines in construction activity willprove to be a large drag on overall activity inQII.

    The underlying story remains buoyant, althoughperhaps less upbeat than initially thoughtfollowing the QI GDP result. Over the first halfof the year, the economy probably grew at anaverage quarterly pace of 0.4-0.5%, which isconsistent with where business confidence wasprevailing. In addition, the outlook for thesecond half of 2011 remains solid. We expectto see continued gradual recovery in thehousehold sector and business investment.Many of the industries that will be underpinningthe QII decline are unlikely to remain weak

    Retail spending and real estate-related servicesare expected to be the main contributors to QIIgrowth. Retail spending volumes lifted 1.5%(on a GDP basis), following on from theprevious quarters strong growth. The increasewas reasonably broad-based across regions,although the strongest growth was in otherSouth Island, which suggests there was anoticeable impact of displaced activity as manyCantabrians relocated following the quake.Nonetheless, the strength of spending growthover the first half of the year indicates animprovement in underlying household demand.

    Reinforcing the improvement in householddemand, house sales lifted 13% over thequarter which will underpin a lift in real estate-

    -1.5

    -1.0

    -0.5

    0.0

    0.5

    1.0

    1.5

    2.0

    M ar-02 Dec-03 Sep-05 Jun-07 M ar-09 Dec-10

    -1.5

    -1.0

    -0.5

    0.0

    0.5

    1.0

    1.5

    2.0

    NZ GDP GROWTH(per quarter , seas adj)

    Source: Stats NZ, ASB

    %

    (f )

    %

    -3

    -2

    -1

    0

    1

    2

    3

    Mar-90 Mar-94 Mar-98 Mar-02 Mar-06 Mar-10

    -3

    -2

    -1

    0

    1

    2

    3

    EXPERIENCED OWN ACTIVITY

    GDP FORECAST

    Quarterly GDP forecast based off

    Experienced Own A ctivity

    qpc qpc

    GDP quarter %

    Source: NZIER, Stats NZ

    NZ GDP GROWTH

    -3

    -1

    1

    3

    5

    7

    Mar-89 Mar-93 Mar-97 Mar-01Mar-05 Mar-09 Mar-13

    -3

    -1

    1

    3

    5

    7

    Source: Stats NZ, ASB

    %

    Per quarter

    Annual average % (f )

    NZ QII GDP dataexpected to showgrowth has slowed.

    Underlying growthstory remainspositive.

    Retail spendingpicks up.

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    12/25

    Global Markets Research

    Economics: Perspective

    12

    related services. The recovery in housingturnover has started to stall more recently.

    However, as Red Zone payouts inChristchurch begin to be finalised, we expectthis to generate a further increase in housingmarket activity.

    Declines in manufacturing, wholesale trade andconstruction are expected to be the main dragon GDP growth over QII. The decline inmanufacturing and wholesale trade activity islikely to be temporary. NZ data are inherentlyvolatile, and to see a decline following 2 strongquarters of growth in manufacturing was not outof the ordinary. Manufacturing confidenceremains relatively upbeat, with the highAUD/NZD providing support to many NZmanufacturing exporters. In addition,recovering NZ demand was expected toprovide further support for domestically-

    focused manufactures.

    Construction activity is expected to decline 6%over QII, led by a sharp 12% drop in residentialconstruction. The extent of the decline wassurprising. However, we expect residentialconstruction activity to begin to stabilise overthe second half of 2011. Dwelling consentshave started to show tentative signs ofrecovery. In addition, from 2012 onwardsreconstruction activity in Canterbury should seeresidential construction increase around 50%from current lows.

    The recent weakness in certain sectorshighlights that the underlying pace of recoverymay be more modest than initially thought .Nonetheless, despite the blip in activity over QII,the economy continues to gradually recovery.Over the second half of 2011, the Rugby WorldCup will provide a boost to activity andconfidence. Then from mid-2012,reconstruction activity will augment the gradualunderlying recovery.

    RBNZ remains optimistic on the domesticgrowth outlook, but has revised down its

    growth forecasts based on the weaker globaloutlook and a higher NZ dollar assumption. Theblip in QII activity reduces some of the urgencyfor OCR increases. This allows the RBNZ totake more time to assess the impacts of theEurozone debt crisis and slowing global growthon the NZ economy. .

    Increases in the OCR are now largelydependent on the global outlook, andspecifically developments in Europe. The keyto the timing is when the European financialcrisis dies down sufficiently (assuming it doesthat before triggering another global crisis!).While there is much uncertainty about both thetiming and size of the first OCR increase, fornow we see a 50 basis point OCR increase in

    Q2 2011 PRODUCTION GDP

    FORECAST(pp contribution to quarterly % change)

    -0.4 -0.2 0.0 0.2 0.4

    Agriculture

    Forest/Fish/Mining

    M anufacturing

    Elec/Gas/Water

    Construction

    Wholesale Trade

    Retail Trade

    Transport/Communication

    Finance

    Government

    Education etc

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    8.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    8.0

    Sep-08 Sep-09 Sep-10 Sep-11 Sep-12

    Source: CBA

    % p.a.OCR FORECASTS

    (vs. pricing of overnight index swaps)

    CBA Economics Forecast

    % p.a.

    Currentmarket pricing

    0

    50

    100

    150

    200

    Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

    INTERBANK FUNDING PRESSURES(spread between interbank rates and

    expected policy rates)

    Euroarea

    N Z

    Source:

    Bloomberg

    Manufacturing,wholesale trade,construction weak.

    Growth expected topick up after QII blip.

    RBNZ sidelined byoffshore risks, but

    local flat spotreduces urgency.

    We now expect theRBNZ to remain onhold until March2012.

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    13/25

    Global Markets Research

    Economics: Perspective

    13

    March as the most likely scenario. Beyond that,we continue to expect 25bp increases at thesubsequent meetings to an OCR peak of 4%.

    Chris Tennent-Brown FX Economist T. +612 9117 1378 E. [email protected]

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    14/25

    Global Markets Research

    Economics: Perspective

    14

    The Week Ahead

    Calendar - Australasia, Japan and China

    Time Forecast

    Date AEST Econ Event Period Unit Last Market CBA

    Mon 19 Sep 08:00 NZ Westpac NZ consumer confidence QIII Index 112.0 ~ ~

    08:30 NZ Performance services index Aug Index 54.5 ~ ~

    Tue 20 Sep 11:30 AU Reserve Bank's Board September minutes Sep ~ ~ ~ ~

    15:00 JN Coincident index CI Jul F Index 109.0 ~ ~

    15:00 JN Leading index CI Jul F Index 106.0 ~ ~

    Wed 21 Sep 08:45 NZ Current account balance QII NZD bn -0.1 -0.7 -0.6

    08:45 NZ Current account to GDP ratio QII ytd -4.3 -4.0 -4.0

    08:45 NZ Net migration s.a. Aug ~ -220.0 ~ ~

    09:50 JN Merchandise trade balance total Aug bn 70.0 -196.3 ~

    09:50 JN Adjusted merchandise trade balance Aug bn -130.5 -22.1 ~

    09:50 JN Merchandise trade exports Aug y%ch -3.4 8.0 ~

    09:50 JN Merchandise trade imports Aug y%ch 9.9 14.3 ~

    10:30 AU Westpac leading index Jul m%ch 0.1 ~ ~

    12:00 CH Conference board China July leading economic index

    13:00 NZ Credit card spending Aug m%ch 1.0 ~ ~

    23:00 NZ RBNZ Governor Bollard speaks at a Euromoney conference in New York

    23:20 AU RBA Deputy Governor Battellino speaks at a Euromoney conference in New York

    Thu 22 Sep 08:45 NZ GDP QII q%ch

    y%ch

    0.8

    1.4

    0.5

    1.7

    0.1

    1.3

    09:00 AU RBA's Lowe speaks at Australian economic forum in Sydney

    11.30 AU ABS announces further changes to Australian CPI

    Fri 23 Sep 10:00 AU Conference board leading index Jul % -0.8 ~ ~

    11.30 AU Financial Stability Review

    Thu 22 Sun25 Sep ~ CH HSBC Flash China Manufacturing PMI Sep Index ~ ~ ~

    Calendar North America & Europe

    Please note all days and times are UK time, not local release day/times

    UK Forecast

    Date Time Econ Event Period Unit Last Market CBA

    Mon 19 Sep 00:01 UK Bank of England publishes quarterly bulletin

    00:01 UK Rightmove house prices Sep m%ch -2.1 ~ ~

    10:00 EC Construction output Jul m%ch -1.8 ~ ~

    11:00 EC ECB's Gonzalez-Paramo speaks in Frankfurt

    14:30 EC ECB announces bond purchases

    18.45 CA Bank of Canada Deputy Governor Lane speaks at Sibos Conference in Toronto

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    15/25

    Global Markets Research

    Economics: Perspective

    15

    Tue 20 Sep 06:45 SZ SECO September 2011 economic forecasts

    07:00 GE Producer prices Aug m%ch 0.7 0.1 ~

    07:00 SZ Trade balance Aug CHF bn 2.8 ~ ~

    07:00 SZ Exports real Aug m%ch -3.0 ~ ~

    07:00 SZ Imports real Aug m%ch 0.1 ~ ~

    10:00 GE ZEW survey (current situation) Sep Index 53.5 37.5 ~

    10:00 EC ZEW survey (econ. sentiment) Sep Index -40.0 -37.6 ~

    13:30 CA Leading indicators Aug m%ch 0.2 ~ ~

    13:30 CA Wholesale sales Jul m%ch 0.2 0.3 ~

    13:30 US Housing starts Aug 000 604.0 590.0 ~

    13:30 US Building permits Aug 000 597.0 588.0 ~

    16:30 CA Bank of Canada Governor Carney Speaks in Saint John, New Brunswick

    Wed 21 Sep ~ GE Germanys Budget Committee has final meeting on Greece, EFSF

    00:01 UK Nationwide consumer confidence Aug Index 49.0 48.0 ~

    09:30 UK Bank of England releases Monetary Policy Committee minutes from the September meeting

    09:30 UK Public finances (PSNCR) Aug bn -5.6 ~ ~

    12:00 CA CPI Aug y%ch 2.7 2.9 ~

    12:00 CA Bank Canada CPI core Aug y%ch 1.6 1.6 ~

    15:00 US Existing home sales Aug mn 4.7 4.8 ~

    19:15 US FOMC rate decision Sep % 0.25 0.25 0.25

    Thu 22 Sep 10:00 EC Industrial new orders s.a. Jul m%ch -0.9 ~ ~

    10:00 SZ Credit Suisse ZEW survey (expectations) Sep Index -71.4 ~ ~

    11:00 UK CBI trends total orders Sep Index 1 ~ ~

    13:30 CA Retail sales Jul m%ch 0.7 -0.3 ~

    13:30 CA Retail sales less autos Jul m%ch -0.1 0.2 ~

    13:30 US Initial jobless and continuing claims Sep 000 ~ ~ ~

    15:00 EC Consumer confidence Sep A Index -16.5 -17.5 ~

    15:00 US Leading indicators Aug m%ch 0.5 0.1 ~

    15:00 US House price index Jul m%ch 0.9 ~ ~

    Fri 23 Sep 15.00 US International Monetary Fund World Bank hold annual meeting

    08:30 SZ Swiss National Bank publishes quarterly bulletin

    08:30 GE PMI manufacturing Sep A Index 50.9 50.5 ~

    09:00 EC PMI composite Sep A Index 50.7 50.5 ~

    09:00 EC PMI manufacturing Sep A Index 49.0 49.0 ~

    09:00 EC PMI services Sep A Index 51.5 51.0 ~

    18.30 US Feds Dudley to speak on panel in Washington

    21.30 EC ECBs Trichet speaking in Washington

    Sat 24 Sep 15.00 US International Monetary Fund World Bank hold annual meeting

    Sun 25 Sep 15.00 US International Monetary Fund World Bank hold annual meeting

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    16/25

    Global Markets Research

    Economics: Perspective

    ames McIntyre Economist T. +612 9118 1100 E. [email protected] Tennent-Brown FX Economist T. +612 9117 1378 E. [email protected]

    16

    Calendar Key Events To Watch

    Australia and New Zealand

    Monday 19 September

    NZ Consumer Confidence, QIII, Index (112 prev)

    Consumer confidence has generally held up in recent months. Whilethe Christchurch earthquakes in June saw a drop in sentiment inJuly, there was a rebound in the following month. The generalimprovement in household sector conditions has helped to supportconsumer confidence. A recovery in the labour market is takingplace, and this is starting to flow through to a recovery in wagegrowth. Meanwhile, recent housing market data points to a gradualrecovery in housing market activity taking place.

    With more households indicating now was a good time to purchasea major household item, retail spending improved over the first half

    of 2011. Nonetheless, with household debt levels still at high levelsand the global risks escalating in recent months, a degree of cautionis likely to remain in the household sector.

    70

    80

    90

    100

    110

    120

    130

    140

    Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10

    70

    80

    90

    100

    110

    120

    130

    140

    150

    NZ CONSUMER CONFIDENCE SURVEYS

    Westpac-M cDermott Miller

    (lhs)

    Roy Morgan

    Research (rhs)

    Source: Roy M organ,Westpac-McDermott M iller survey

    Tuesday 20 September

    AU RBA September Board Meeting Minutes

    In contrast to the August meeting, the RBA board is unlikely to haveconsidered raising interest rates in September. The post-meetingstatement made it clear that the RBA is assessing the potential risksto the Australian growth and inflation outlook from the current globalfinancial market turmoil. We expect the minutes to highlight theRBAs thinking on the potential linkages between current market

    uncertainty and the outlook for domestic growth and inflation. TheRBA has been enunciating a wait and see approach to theunfolding troubles in Europe. The minutes may lay out some clearmarkers on what the RBA sees as benchmarks for progress towardsa resolution. The RBAs bi-annual Financial Stability Review will bereleased next week as well, and is likely to have a significant focuson the European banking and sovereign situation.

    Wednesday 21 September

    NZ Current Account Balance, QII, NZD mn, (f) 600 (-97 prev)

    NZ Current Account to GDP Ratio, QII, %, (f) -4.0 (-4.2 prev)

    We expect a current account deficit of $600 million in QII, bringingthe annual deficit back to 4% of GDP. In seasonally-adjusted terms,the deficit is likely to be unchanged from the previous quarter at $1.7billion.

    Underpinning the QII deficit is an improvement in the goods balance.Export receipts surged 4.5%, underpinned by strong prices for meatand dairy and a lift in manufactured exports. Meanwhile we expectthe services balance to deteriorate, weighed by lower exportreceipts as visitor arrivals were weak over the quarter.

    Over QI, the income deficit was reduced, due to reduced earningson foreign-owned NZ companies as a result of insurance-industrylosses arising from the Canterbury earthquake. We expect further

    realisation of losses will weigh on foreign earnings in QII, although toa lesser extent than QI.

    2

    4

    6

    8

    2

    4

    6

    8

    Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12

    RBA CASH RATE% %

    CBA(f)

    Mktpricing

    15/9/2011

    -20

    -16

    -12

    -8

    -4

    0

    M ar-95 M ar-99 M ar-03 M ar-07 M ar-11

    -20

    -16

    -12

    -8

    -4

    0

    CURRENT ACCOUNT BALANCE

    (annual total)

    Source: Stats NZ

    $b

    Tota l

    % of GD P

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    17/25

    Global Markets Research

    Economics: Perspective

    ames McIntyre Economist T. +612 9118 1100 E. [email protected] Tennent-Brown FX Economist T. +612 9117 1378 E. [email protected]

    17

    Thursday 22 September

    NZ GDP, QII, q/y%ch, (f) 0.1/1.4 (0.8/1.4 prev)

    We expect GDP growth of just 0.1% over QII. This follows a robust0.8% increase over the first quarter of 2011. The strength of the QI

    increase was particularly impressive given the disruption caused bythe February earthquake.

    Over QII, we expect growth in retail spending and housing related-activity will be offset by declines in construction manufacturing andwholesale trade.

    Despite the expectation of weak growth over QII, the underlyingstory remains buoyant, although perhaps less upbeat than initiallythought following the QI result. Over the first half of the year, theeconomy probably grew at an average quarterly pace of 0.4-0.5%,which is consistent with where business confidence was prevailing.In addition, the outlook for the second half of 2011 remains solid.Many of the industries that will be underpinning the QII decline areunlikely to remain weak and we expect to see continued gradualrecovery in the household sector and business investment.

    -1.5

    -1.0

    -0.5

    0.0

    0.5

    1.0

    1.5

    2.0

    M ar-02 Dec-03 Sep-05 Jun-07 M ar-09 Dec-10

    -1.5

    -1.0

    -0.5

    0.0

    0.5

    1.0

    1.5

    2.0

    NZ GDP GROWTH(per quarter, seas adj)

    Source: Stats NZ, ASB

    %

    ( f)

    %

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    18/25

    Global Markets Research

    Economics: Perspective

    oseph Capurso Currency Strategist T. +612 9118 1106 E. [email protected] Dragicevich FX Economist T. +612 9118 1107 E. [email protected]

    hris Tennent-Brown FX Economist T. +612 9117 1378 E. [email protected]

    18

    International

    Tuesday 20 September

    SZ Trade Balance, Aug, CHF bn, (2.81 prev)

    The Swiss National Bank (SNB) and Swiss government remainconcerns about the impact the strong CHF is having on thedomestic economy, particularly on exports. Exports play animportant role in the Swiss economy, equating to approximately58% of GDP. Driven by the downside risks to the domestic outlook,brought on by the CHF strength, the SNB has acted in recent weeks,via policy easing and setting a minimum level for the EUR/CHF.

    Despite the moves by the SNB, headwinds remain for the Swisstrade sector. Approximately 20% of Switzerlands exports are sentto the heavily indebted nations in Europe, (65% of exports are sentto the Eurozone). The fiscal austerity measures in some of theseeconomies, coupled with a broader economic slowdown, are likelyto act as a headwind to Swiss export growth in coming months. In

    the near-term, Swiss trade is likely to continue to experiencedownside risks because of the lingering effects of the CHF out-performance, while a slowing domestic economy is expected toweigh on import demand.

    Wednesday 21 September

    JP Merchandise Trade Balance, August, bn, (72.5 prev)

    The March natural disaster negatively impacted Japaneseproduction and exports in QII, but the situation appears to beimproving. Having recorded trade deficits in April and May, Japanposted a surprise 70.7bn surplus in June, and a 72.5bn tradesurplus was recorded in July.

    Despite the recovery, exports were still down 3.3% on year-agolevels in July. We expect exports to gradually recover as the supplychain issues are resolved. However, given the extent of the damagecaused by the recent events, and the ongoing logistical issues, it islikely that Japanese exports will continue to be hampered in August.The Bank of Japan (BoJ) has indicated the domestic economy isunlikely to commence its recovery until later in the year.

    Wednesday 21 September

    UK Bank of England September Meeting Minutes

    As expected the Bank of England (BoE) left the bank rate and itstarget for asset purchases unchanged at the September meeting.The UK economy is clearly still in a soft patch at present and has yetto show signs of meaningful re-acceleration. With a significantnegative output gap still prevalent, there is no reason to expect anymove towards policy tightening any time soon. Indeed, to the extentthat there will be any near-term shift in bias, it is much more likely tobe towards easier monetary policy settings and additional QE.

    As always this will be data dependent, conditional on the evolutionof the economy and subject to various risks. Further assetpurchases by the BoE are not our central case assumption at thisstage, but the risks are increasing. The MPC minutes will revealwhether there was a further shift towards more QE on the Monetary

    Policy Committee.

    7

    14

    21

    28

    35

    7

    14

    21

    28

    35

    Dec-95 Oct-98 Aug-01 Jun-04 Apr-07 Feb-10 Nov-12

    SWISS EXPORTS(% by destination)% %

    % sent toGermany

    % sent toindebted Europe

    % sent to US

    % sent to non-Europe

    60

    80

    100

    120

    140

    60

    80

    100

    120

    140

    Jun-03 Jun-05 Jun-07 Jun-09 Jun-11

    JAPAN EXPORT VOLUMES &INDUSTRIAL PRODUCTION

    Index Index

    Total Export Volumes (3MMA)

    Industrial Production (3MMA)

    Base 2005 = 100

    0

    2

    4

    6

    8

    10

    0

    2

    4

    6

    8

    10

    Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13

    UK INTEREST RATES

    % %

    Mortgage rate

    Bank of Englandofficial rate

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    19/25

    Global Markets Research

    Economics: Perspective

    oseph Capurso Currency Strategist T. +612 9118 1106 E. [email protected] Dragicevich FX Economist T. +612 9118 1107 E. [email protected]

    hris Tennent-Brown FX Economist T. +612 9117 1378 E. [email protected]

    19

    Wednesday 21 September

    CA CPI, Aug, m/y%ch, (0.2/2.7 prev)

    CA Bank Canada Core CPI, Aug, m/y%ch, (0.2/1.6 prev)

    Canadian consumer prices lifted 0.2% in July, after a 0.7% fall inJune. Annual inflation has eased from a peak of 3.7% in May to2.7% in July. The May result was the highest annual rate of inflationsince September 2008. The recent high headline CPI was largelydue to higher energy and food prices, and the transitory impact ofprovisional tax increases. Falling fuel costs has helped lowerheadline CPI inflation since May, with gasoline prices falling 3.7% inJune. In July, the impact of provincial sales tax increases fadedfrom the annual result, and mortgage costs declined. Over June andJuly automobile costs have also fallen.

    The Bank of Canada (BoC) moderated its inflation outlook at theSeptember policy review. The BoC expects the recent negativeglobal developments will dampen domestic resource utilization and

    inflationary pressures. The BoC expects CPI inflation to continue tomoderate, and core inflation is also expected to remain well-contained.

    Wednesday 21 September

    US FOMC Policy Meeting, Sep, % (f) 0.25 (0.25 prev)

    Following soft growth in the first half of 2011, the US economy hasdeteriorated further. We expect the FOMC to deliver further policystimulus to support the economy in the form of Operation Twist.Operation Twist refers to the Federal Reserve (Fed) selling its short-term holdings of US treasuries to buy long-term Treasuries. Theeconomy is stimulated because corporates and households

    borrowing interest rates are linked to long-term US treasury yields.If the FOMC determines the US economy requires further support,the FOMC may also cut the interest rate paid to banks on theirexcess reserves to encourage banks to lend.

    Thursday 22 September

    CA Retail Sales, July, m%ch, (0.7 prev)

    CA Retail Sales Less Autos, July, m%ch, (-0.1 prev)

    A lift in auto sales helped boost overall retail sales in June. Retailsales (excluding autos) contracted 0.1% in the month of June, andgrew by only 0.3% in the quarter.

    Canadian consumer confidence dropped for the fourth consecutivemonth in August. The lack of confidence can in part be attributed touncertainty about job prospects. Employment growth has slowedsince April, and other economic indicators have weakened recently,and this may be contributing to the caution. High fuel costs havealso been an issue for consumers, although prices have easedrecently.

    We expect consumer caution to continue in the coming months,given the global uncertainties, and softening consumer sentiment.

    -1

    1

    3

    5

    -1

    1

    3

    5

    Jan-00 Jan-03 Jan-06 Jan-09 Jan-12

    CANADA INFLATION% %

    BoC's 1-3% total Inflationtarget range for CPI

    Headline CPI

    Core CPI

    0.00

    0.50

    1.00

    1.50

    2.00

    2.50

    0.00

    0.50

    1.00

    1.50

    2.00

    2.50

    Jan-11 Jan-12 Jan-13

    FEDERAL FUNDS RATE

    %%

    CBA (f)

    Market(f)

    -5

    0

    5

    10

    15

    50

    75

    100

    125

    150

    Jan-02 Jul-04 Jan-07 Jul-09 Jan-12

    %

    ConsumerConfidence (rebased

    Aug 2002 = 100, lhs)

    Retail Sales Growth (Ex- Auto, YOY, rhs)

    CANADA RETAIL SALES ANDCNSUMER CONFIDENCE

    Index

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    20/25

    Global Markets Research

    Economics: Perspective

    oseph Capurso Currency Strategist T. +612 9118 1106 E. [email protected] Dragicevich FX Economist T. +612 9118 1107 E. [email protected]

    hris Tennent-Brown FX Economist T. +612 9117 1378 E. [email protected]

    20

    Friday 23 September

    EZ PMI Services, Sep A, Index, (51.5 prev)

    EZ PMI Manufacturing, Sep A, Index, (49.0 prev)

    EZ PMI Composite, Sep A, Index, (50.7 prev)

    Eurozone PMI indices dropped in August as the financial marketstress weighed on the outlook for the service and manufacturingsectors. The manufacturing PMI for Eurozone dropped to 49 inAugust from 50.4 in July. A reading below 50 indicates contractionfor the sector. The German Manufacturing PMI remained inexpansionary territory last month, but the indicators for French andItalian manufacturing printed below 50, suggesting futurecontraction for manufacturing in these countries. The EurozoneServices PMI is faring slightly better, printing at 51.5 in August. Butthe reading has drifted significantly lower from its peak back inMarch of 57.2

    Flash estimates for September manufacturing and services PMIs are

    published for Germany, France and the Euro-zone on 23 September.Based on the ongoing turmoil in financial markets during September,further downside moves look possible.

    30

    40

    50

    60

    70

    30

    40

    50

    60

    70

    Apr-06 Feb-08 Nov-09 Sep-11

    MANUFACTURING PMIsIndex Index

    Eurozone

    Germany

    France

    Italy

    Global

    Greece

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    21/25

    Global Markets Research

    Economics: Perspective

    21

    Monetary Policy

    Country Last Move Next Meeting and Forecast CBA View

    Australia

    (RBA)

    25bpt rise to 4.75% on 7 November2010.

    4 October, 2011

    Sep 11 Dec 11 Mar 12 Jun 12

    4.75% 4.75% 5.00% 5.00%

    The QII CPI confirmed the inflationtrend has turned up. Rate rises arelikely. We expect a rate rise inFebruary. The cash rate isexpected to reach 5.50% by 2013.

    US

    (FOMC)

    75-100bpt cut to 0-0.25% on16 December 2008.

    21 September, 2011

    Sep 11 Dec 11 Mar 12 Jun 12

    0-0.25% 0-0.25% 0-0.25% 0-0.25%

    Given the loss of momentum in theUS economy, particularly in thelabour market, we expect the Fedto maintain the size of its balancesheet until early 2013. The first Fedfunds hike is not expected until mid2013.

    Eurozone

    (ECB)

    25bpt rise to 1.50% on 7 July 2011. 6 October, 2011

    Sep 11 Dec 11 Mar 12 Jun 12

    1.50% 1.50% 1.50% 1.75%

    The recent deterioration inEurozone economic indicatorssuggests that the ECB will pauseits process of monetary policynormalisation. We expect the ECBto remain on hold until QII 2012.

    UK

    (MPC)

    50bpt cut to 0.5% on 5 March 2009. 6 October, 2011

    Sep 11 Dec 11 Mar 12 Jun 12

    0.50% 0.50% 0.50% 0.50%

    The stance of the MPC has shifted;elevated inflation does not appearoverly concerning. Given thesubdued outlook for the UKeconomy, we expect the BoE toremain on hold until QIII 2012.

    NZ

    (RBNZ)

    50bpt cut to 2.5% on 10 March. 27 October, 2011

    Sep 11 Dec 11 Mar 12 Jun 12

    2.50% 2.50% 3.00% 3.50%

    The escalating debt crisis inEurozone is dominating the RBNZsoutlook, and we expect the RBNZwill leave the OCR on hold untilMarch next year. We expect a50bpt OCR increase in March.

    Canada

    (BoC)

    25bpt rise to 1.00% on 8 September2010.

    25 October, 2011

    Sep 11 Dec 11 Mar 12 Jun 12

    1.00% 1.00% 1.00% 1.25%

    Softness in the US economy islikely to effect the Canadianeconomy given the strong tradeties. We expect the BoC to remainon hold until mid 2012 before itembarks on a slow and steadyremoval of policy accommodation.

    Japan

    (BoJ)

    0-10bpt cut to 0-0.1% on 5 October2010.

    7 October, 2011

    Sep 11 Dec 11 Mar 12 Jun 12

    0-0.10% 0-0.10% 0-0.10% 0-0.10%

    In response to the recent naturaldisasters, the Bank of Japan hasimplemented further quantitativeeasing measures. Monetary policyin Japan is likely to remainaccommodative for some time.

    0

    2

    4

    6

    8

    0

    2

    4

    6

    8

    Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10

    OFFICIAL INTEREST RATES% %

    CanadaUS

    UK

    Euro

    Japan

    NZ

    Australia

    3.0

    3.5

    4.0

    4.5

    5.0

    5.5

    3.0

    3.5

    4.0

    4.5

    5.0

    5.5

    Jan 11 Mar 11 May 11 Jul 11 Sep 11

    %

    3 monthsahead

    12 monthsahead

    Source: Reuters

    RBA CASH RATE PRICING%

    Cashrate

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    22/25

    Global Markets Research

    Economics: Perspective

    Forecasts - Economic

    CBA AUSTRALIAN ECONOMIC FORECASTS: Sep 20

    Fiscal Years Calendar Years

    2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2006 2007 2008

    (a) (a) (a) (a) (f) (f) (a) (a) (a)

    Economic Activity

    Private final demand 6.4 0.1 0.8 3.5 4.8 5.2 3.6 7.1 3.1

    Of which: Household spending 4.7 0.2 2.1 3.3 2.8 3.1 3.4 5.5 1.9

    Dwelling investment 1.2 -1.9 2.1 2.6 2.2 -1.1 -3.0 3.0 2.1Business investment 15.8 1.4 -4.9 6.2 13.4 14.2 8.5 16.1 9.6

    Public final demand 4.2 3.6 6.7 4.5 1.5 -0.1 3.7 3.4 6.3Domestic final demand 5.9 0.9 2.1 3.8 4.0 4.0 3.7 6.3 3.8

    Inventories (contrib to GDP) 0.0 -0.4 0.3 0.4 -0.2 0.1 -0.4 0.6 -0.3

    GNE 5.9 0.4 2.4 4.1 3.8 4.0 3.2 6.9 3.5Exports 4.0 2.6 5.3 0.2 8.3 7.6 2.2 2.4 4.7Imports 14.6 -3.3 5.1 10.7 9.3 8.6 6.9 12.2 11.5

    Net exports (contrib to GDP) -2.1 1.4 0.1 -2.4 -0.4 -0.4 -0.9 -2.0 -1.5

    GDP 3.8 1.4 2.3 1.9 3.5 3.7 2.6 4.6 2.6

    Prices & WagesCPI 3.4 3.1 2.3 3.1 2.9 3.1 3.5 2.3 4.4

    Underlying CPI 3.7 4.3 3.1 2.4 3.2 3.2 2.8 2.9 4.4AWOTE 4.9 5.5 5.6 4.2 4.8 3.9 3.4 4.8 4.8

    WPI 4.1 4.1 3.0 3.8 4.0 3.9 4.1 4.0 4.2

    Real h/hold disposable income 3.0 8.6 0.9 5.2 2.9 2.8 5.6 6.3 4.9

    Labour MarketEmployment 3.0 1.6 1.4 2.9 0.9 1.8 2.6 3.1 2.8

    Unemployment rate 4.2 4.9 5.5 5.1 5.2 5.0 4.8 4.4 4.3

    External AccountsCurrent Account: $bn -74.5 -38.5 -53.4 -33.8 -21.6 -23.1 -55.2 -70.3 -55.

    % of GDP -6.3 -3.1 -4.2 -2.4 -1.4 -1.4 -5.3 -6.2 -4.5

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    23/25

    Global Markets Research

    Economics: Perspective

    Forecasts - Financial

    USD versus

    End Period Cash

    Rate

    90-day

    Bank

    Bill

    180-day

    Bank

    Bill

    3-year

    Bond

    10-year

    Bond

    AUD JPY EUR GB

    Dec-07 6.75 7.24 7.36 6.80 6.33 0.88 111.7 1.46 1.

    Mar-08 7.25 7.86 7.96 6.16 6.05 0.91 99.7 1.58 1.

    Jun-08 7.25 7.84 7.96 6.72 6.45 0.96 106.2 1.58 1.

    Sep-08 7.00 7.32 7.04 5.07 5.40 0.79 106.1 1.41 1.

    Dec-08 4.25 4.15 0.00 3.29 3.99 0.70 90.7 1.40 1.

    Mar-09 3.25 3.14 3.06 3.37 4.42 0.69 99.0 1.33 1.

    Jun-09 3.00 3.19 3.31 4.75 5.52 0.81 96.4 1.40 1.

    Sep-09 3.00 3.38 3.78 5.04 5.36 0.88 89.7 1.46 1.

    Dec-09 3.75 4.28 4.47 5.06 5.64 0.90 93.0 1.43 1.

    Mar-10 4.00 4.49 4.76 5.39 5.78 0.92 93.4 1.35 1.

    Jun-10 4.50 4.92 5.00 4.56 5.09 0.84 88.4 1.22 1.

    Sep-10 4.50 5.01 5.20 4.82 4.96 0.97 83.5 1.36 1.

    Dec-10 4.75 5.04 5.23 5.30 5.55 1.02 81.1 1.34 1.

    Mar-11 4.75 4.93 5.01 5.07 5.49 1.03 83.1 1.42 1.

    Jun-11 4.75 5.03 5.07 4.78 5.21 1.07 80.6 1.45 1.

    Sep-11 4.75 4.80 4.70 3.80 4.40 1.03 76.8 1.39 1.

    Dec-11 4.75 4.90 5.00 4.50 4.70 1.04 77.0 1.39 1.Mar-12 5.00 5.10 5.20 4.65 4.70 1.07 77.0 1.43 1.

    Jun-12 5.00 5.20 5.30 4.90 4.80 1.08 77.0 1.44 1.

    Sep-12 5.25 5.40 5.50 5.05 4.90 1.08 78.0 1.44 1.

    Dec-12 5.25 5.50 5.60 5.15 5.00 1.08 79.0 1.43 1.

    Interest Rates Exchange Rates

    Forecast

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    24/25

    Global Markets Research

    Economics: Perspective

    24

    Please view our website at www.research.commbank.com.au. The Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 ("the Bank") and itssubsidiaries, including Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 ("CommSec"), Commonwealth Australia Securities LLC, CBA Europe Ltdand Global Markets Research, are domestic or foreign entities or business areas of the Commonwealth Bank Group of Companies (CBGOC). CBGOC and theirdirectors, employees and representatives are referred to in this Appendix as the Group. This report is published solely for informational purposes and is not to beconstrued as a solicitation or an offer to buy any securities or financial instruments. This report has been prepared without taking account of the objectives, financialsituation and capacity to bear loss, knowledge, experience or needs of any specific person who may receive this report. No member of the Group does, or is requiredto, assess the appropriateness or suitability of the report for recipients who therefore do not benefit from any regulatory protections in this regard. All recipientsshould, before acting on the information in this report, consider the appropriateness and suitability of the information, having regard to their own objectives, financial

    situation and needs, and, if necessary seek the appropriate professional, foreign exchange or financial advice regarding the content of this report. We believe that theinformation in this report is correct and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time ofits compilation, but no representation or warranty, either expressed or implied, is made or provided as to accuracy, reliability or completeness of any statement madein this report. Any opinions, conclusions or recommendations set forth in this report are subject to change without notice and may differ or be contrary to the opinions,conclusions or recommendations expressed elsewhere by the Group. We are under no obligation to, and do not, update or keep current the information contained inthis report. The Group does not accept any liability for any loss or damage arising out of the use of all or any part of this report. Any valuations, projections andforecasts contained in this report are based on a number of assumptions and estimates and are subject to contingencies and uncertainties. Different assumptions andestimates could result in materially different results. The Group does not represent or warrant that any of these valuations, projections or forecasts, or any of theunderlying assumptions or estimates, will be met. Past performance is not a reliable indicator of future performance. The Group has provided, provides, or seeks toprovide, investment banking, capital markets and/or other services, including financial services, to the companies described in the report and their associates. Thisreport is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other

    jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject any entity within the Group to anyregistration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to theGroup. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the priorwritten permission of the appropriate entity within the Group. In the case of certain products, the Bank or one of its related bodies corporate is or may be the onlymarket maker. The Group, its agents, associates and clients have or have had long or short positions in the securities or other financial instruments referred to herein,and may at any time make purchases and/or sales in such interests or securities as principal or agent, including selling to or buying from clients on a principal basisand may engage in transactions in a manner inconsistent with this report.

    US Investors: If you would like to speak to someone regarding the subject securities described in this report, please contact Commonwealth Australia Securities LLC(the US Broker-Dealer), a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (the Exchange Act) and a member of the Financial IndustryRegulatory Authority (FINRA) at 1 (212) 336-7737. This report was prepared, approved and published by Global Markets Research, a division of CommonwealthBank of Australia ABN 48 123 123 124 AFSL 234945 ("the Bank") and distributed in the U.S. by the US Broker-Dealer. The Bank is not registered as a broker-dealerunder the Exchange Act and is not a member of FINRA or any U.S. self-regulatory organization. Commonwealth Australia Securities LLC (US Broker-Dealer) is awholly owned, but non-guaranteed, subsidiary of the Bank, organized under the laws of the State of Delaware, USA, with limited liability. The US Broker-Dealer is notauthorized to engage in the underwriting of securities and does not make markets or otherwise engage in any trading in the securities of the subject companiesdescribed in our research reports. The US Broker-Dealer is the distributor of this research report in the United States under Rule 15a-6 of the Exchange Act andaccepts responsibility for its content. Global Markets Research and the US Broker-Dealer are affiliates under common control. Computation of 1% beneficialownership is based upon the methodology used to compute ownership under Section 13(d) of the Exchange Act. The securities discussed in this research report maynot be eligible for sale in all States or countries, and such securities may not be suitable for all types of investors. Offers and sales of securities discussed in thisresearch report, and the distribution of this report, may be made only in States and countries where such securities are exempt from registration or qualification orhave been so registered or qualified for offer and sale, and in accordance with applicable broker-dealer and agent/salesman registration or licensing requirements. Thepreparer of this research report is employed by Global Markets Research and is not registered or qualified as a research analyst, representative, or associated personunder the rules of FINRA, the New York Stock Exchange, Inc., any other U.S. self-regulatory organization, or the laws, rules or regulations of any State.

    European Investors: This report is published, approved and distributed in the UK by the Bank and by CBA Europe Ltd (CBAE). The Bank and CBAE are bothregistered in England (No. BR250 and 05687023 respectively) and authorised and regulated in the UK by the Financial Services Authority (FSA). This report does notpurport to be a complete statement or summary. For the purpose of the FSA rules, this report and related services are not intended for retail customers and are notavailable to them. The products and services referred to in this report may put your capital at risk. Investments, persons, matters and services referred to in this reportmay not be regulated by the FSA. CBAE can clarify where FSA regulations apply.

    Singapore Investors: This report is distributed in Singapore by Commonwealth Bank of Australia, Singapore Branch (company number F03137W) and is madeavailable only for persons who are Accredited Investors as defined in the Singapore Securities and Futures Act and the Financial Advisers Act. It has not beenprepared for, and must not be distributed to or replicated in any form, to anyone who is not an Accredited Investor.

    Hong Kong Investors: This report was prepared, approved and published by the Bank, and distributed in Hong Kong by the Bank's Hong Kong Branch. The HongKong Branch is a registered institution with the Hong Kong Monetary Authority to carry out the Type 1 (Dealing in securities) and Type 4 (Advising on securities)regulated activities under the Securities and Futures Ordinance. Investors should understand the risks in investments and that prices do go up as well as down, and insome cases may even become worthless. Research report on collective investment schemes which have not been authorized by the Securities and FuturesCommission is not directed to, or intended for distribution in Hong Kong.

    All investors: Analyst Certification and Disclaimer: Each research analyst, primarily responsible for the content of this research report, in whole or in part, certifies thatwith respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about thosesecurities or issuers; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed bythat research analyst in the report. The analyst(s) responsible for the preparation of this report may interact with trading desk personnel, sales personnel and otherconstituencies for the purpose of gathering, synthesizing, and interpreting market information. Directors or employees of the Group may serve or may have served asofficers or directors of the subject company of this report. The compensation of analysts who prepared this report is determined exclusively by research management

    and senior management (not including investment banking). No inducement has been or will be received by the Group from the subject of this report or its associatesto undertake the research or make the recommendations. The research staff responsible for this report receive a salary and a bonus that is dependent on a number offactors including their performance and the overall financial performance of the Group, including its profits derived from investment banking, sales and tradingrevenue.

    Unless agreed separately, we do not charge any fees for any information provided in this presentation. You may be charged fees in relation to the financial products orother services the Bank provides, these are set out in the relevant Financial Services Guide (FSG) and relevant Product Disclosure Statements (PDS). Our employeesreceive a salary and do not receive any commissions or fees. However, they may be eligible for a bonus payment from us based on a number of factors relating totheir overall performance during the year. These factors include the level of revenue they generate, meeting client service standards and reaching individual salesportfolio targets. Our employees may also receive benefits such as tickets to sporting and cultural events, corporate promotional merchandise and other similarbenefits. If you have a complaint, the Banks dispute resolution process can be accessed on 132221.

    Unless otherwise noted, all data is sourced from Australian Bureau of Statistics material (www.abs.gov.au).

  • 8/4/2019 Commonweath Bank Global Market Research - Economics: Perspective

    25/25

    Global Markets Research

    Economics: Perspective

    Research

    Commodities Telephone Email Address

    Luke Mathews

    Lachlan Shaw

    Paul Hodsman, CFA

    Elise Aaternir

    Agri Commodities

    Mining & Energy Commodities

    Mining & Energy Commodities

    Mining & Energy Commodities

    +612 9118 1098

    +613 9675 8618

    +613 9675 8532

    +613 9675 6202

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    Economics Telephone Email Address

    Michael Blythe

    Michael Workman

    John Peters

    James McIntyre

    Chief Economist

    Senior Economist

    Senior Economist

    Economist

    +612 9118 1101

    +612 9118 1019

    +612 9117 0112

    +612 9118 1100

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    Fixed Income Telephone Email Address

    Adam Donaldson

    Philip Brown

    Alex Stanley

    Michael Bors

    Steve Shoobert

    Winnie Chee

    Tally Dewan

    Kevin Ward

    Head of Debt Research

    Fixed Income Quantitative Strategist

    Associate Analyst, Fixed Income

    Credit Research Analyst

    Credit Research Analyst

    Securitised Product

    Quantitative Analyst

    Database Manager

    +612 9118 1095

    +612 9118 1090

    +612 9118 1125

    +612 9118 1108

    +612 9118 1096

    +612 9118 1104

    +612 9118 1105

    +612 9118 1960

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    Foreign Exchange and International Economics Telephone Email Address

    Richard Grace

    Joseph Capurso

    Peter Dragicevich

    Andy Ji

    Chris Tennent-Brown

    Martin McMahon

    Chief Currency Strategist & Head of International Economics

    Currency Strategist

    FX Economist

    Asian Currency Strategist

    FX Economist

    Economist Europe

    +612 9117 0080

    +612 9118 1106

    +612 9118 1107

    +65 6349 7056

    +612 9117 1378

    +44 20 7710 3918

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    [email protected]

    Delivery Channels & Publications Telephone Email Address

    Monica Eley

    Ai-Quynh Mac

    Internet/Intranet

    Information Services

    +612 9118 1097

    +612 9118 1102

    [email protected]

    [email protected]

    New Zealand Telephone Email Address

    Nick Tuffley

    Jane Turner

    Christina Leung

    ASB Chief Economist

    Economist

    Economist

    +649 301 5659

    +649 301 5660

    +649 301 5661

    [email protected]

    [email protected]

    [email protected]

    Sales

    Institutional Telephone Equities Telephone

    Syd FX

    Credit

    Japan Desk

    Melb

    Lon FX

    Debt & Derivatives

    Corporate

    HK

    Sing

    NY

    +612 9117 0190

    +612 9117 0341

    +612 9117 0020

    +612 9117 0025

    +613 9675 6815

    +613 9675 7495

    +613 9675 6618

    +613 9675 7757

    +44 20 7329 6266

    +44 20 7329 6444

    +44 20 7710 3905

    +852 2844 7538

    +65 6349 7077

    +1212 336 7739

    Syd

    Asia

    Lon/Eu

    NY

    +612 9118 1446

    +613 9675 6967

    +44 20 7710 3573

    +1212 336 7749

    Corporate Telephone

    NSW

    VIC

    SA

    WA

    QLD

    NZ

    Metals Desk

    Agri Desk (Corp)

    Agri Desk

    +612 9117 0377

    +612 9675 7737

    +618 8206 4155

    +618 9482 6044

    +617 3015 4525

    +64 9375 5738

    +612 9117 0069

    +612 9117 0157

    +612 9117 0145