Asian Economics
description
Transcript of Asian Economics
Global Research
Asian Economics
Paul Bloxham
Chief Economist (Australia and New Zealand)
HSBC Bank Australia Limited
+61 (2) 435 966 522 [email protected]
Australia in the Asian century: Looking beyond the mining boomNovember 2012
View HSBC Global Research at: http://www.research.hsbc.com
Issuer of report: HSBC Bank Australia Limited
Disclosures and Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it
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Australia’s is now in its 21st year of continuous growth
Source: ABS; HSBC estimates
-4
-2
0
2
4
6
8
1980 1985 1990 1995 2000 2005 2010
Australian GDP Growth
F/C%
Q4 1991
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Some signs of growth moderating into the second half of 2012
Source: ABS
Unemployment RateSeasonally adjusted
2
4
6
8
10
1978 1982 1986 1990 1994 1998 2002 2006 2010
2
4
6
8
10
% %
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Timely measures of sentiment are around their average levels
Source: Westpac-Melbourne Institute, NAB, Datastream
-45
-30
-15
0
15
30
45
60
75
90
105
1997 2000 2003 2006 2009 2012
-120
-105
-90
-75
-60
-45
-30
-15
0
15
30NAB Business Survey
Confidence
Conditions
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Australia in the Asian century
1) Asia is driving global growth, which is benefiting Australia
2) Mining boom not over yet: more investment and export ramp-up yet to come
3) Local economy will rebalance, with lower rates supporting housing and retail sales
4) Asia presents medium-term opportunities beyond just mining for Australia
5) Lifting productivity is the main challenge and important for inflation and rates
outlook
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1.1) Asia is driving global growth: economic centre of gravity moving east
Source: Quah (2010)
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1.2) China and India expected to overtake the US and Europe as the largest in the world
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1.3) Emerging economies already contributing more to global growth
Source: HSBC estimates
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1.4) China is delivering 50yrs of US advance every decade (India 30 yrs)
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1.5) Europe is straining under the weight of debt
Source: IMF
General Government Gross DebtPer cent of GDP
0
50
100
150
200
250
90 94 98 02 06 10 14 91 95 99 03 07 11 15
0
50
100
150
200
250
European Countries Other Advanced Countries% %
Greece Japan
US
UK
Australia
Italy
IrelandSpain
Germany
France
NZ
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1.6) Europe faces enormous challenges that will be with us for some time
Source: Datastream
European GDP September 2007 = 100
Index
105
100
95
90
85
80 80
85
90
95
100
105
Index
Sep-07 Sep-09 Sep-11 Jun-08 Jun-10 Jun-12
Germany Ireland
Greece
Portugal
Italy
SpainFrance
North Other
Austria Belgium
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1.7) Timely indicators suggest Europe is in recession
Source: Eurostat and HSBC
European Coincidence Indicator (EuroCOIN)
-1.5
-1.0
-0.5
0.0
0.5
1.0
1995 1998 2001 2004 2007 2010 2013
-1.5
-1.0
-0.5
0.0
0.5
1.0
% %
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1.8) US is operating at well below its capacity
Source: Thomson Reuters Datastream
US - Employment to Population Ratio
54
56
58
60
62
64
1950 1960 1970 1980 1990 2000 2010
54
56
58
60
62
64
% %
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1.9) China’s PMI suggests around trend growth
Source: HSBC; Bloomberg
China HSBC PMI
40
45
50
55
2004 2005 2006 2007 2008 2009 2010 2011 2012
40
45
50
55
Index Index
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1.10) High commodity prices may be the new (old) normal?
Source: Erten and O’Campo (2012); HSBC estimates
Real Commodity* Price TrendsAverage for 1860-2010=100
80
90
100
110
1865 1875 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 200580
90
100
110
IndexIndex
* Excludes oil
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1.11) But commodity demand still to be supported by emerging economies
Source: GGDC, Brook Hunt, HSBC estimates, IMF
Copper Demand Across Selected Economies
500 1500 3000 8500 22500 16300060000
20
Cu/pc
16
12
8
4
0
20
Cu/pc
16
12
8
4
0
Asia (NID)
Japan
US
China
IndiaEurope*
* Includes SwitzerlandGDP per capita (EKS$2011, log scale)
Latin America
Asia (other)
Steel Demand Across Selected Economies
500 1500 3000 8500 22500 16300060000
Stl/pc
0.75
0.50
0.25
0.00
Stl/pc
0.75
0.50
0.25
0.00
Asia (NID)
Japan
US
China
India Europe*
* Includes SwitzerlandGDP per capita (EKS$2011, log scale)
Latin America
Zinc Demand Across Selected Economies
500 1500 3000 8500 22500 16300060000
10.0
7.5
5.0
2.5
0.0
Za/pc
10.0
7.5
5.0
2.5
0.0
Za/pc
Asia (NID)
JapanUS
China
India
Europe*
* Includes SwitzerlandGDP per capita (EKS$2011, log scale)
Latin America0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0 10 20 30 40 50
Per
cap
ita e
nerg
y co
nsu
mpt
ion
(BT
Us)
GDP per capita ('000s)
US
Korea
Japan
Germany
ChinaBrazil
Energy Consumption
India
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1.12) Bulk of global population at commodity intensive stage of development
Source: Total Economy Database; IMF; HSBC estimates
Share of Global Population at Commodity Intensive Usage Stage
0
20
40
60
%
0
20
40
60
%
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Forecast
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1.13) Commodity intensive economies driving the bulk of global growth
Source: Total Economy Database; IMF; HSBC estimates
Share of Global Growth in Commodity Intensive Usage Stage
-4
-2
0
2
4
6
%
-4
-2
0
2
4
6
%
1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016
Non commodity intensive phaseCommodity intensive phase
Global growthForecast
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1.14) High AUD has been a key catalyst for slowdown in some sectors
Source: RBA; HSBC
0.00
0.50
1.00
1.50
2.00
2.50
3.00
1901 1908 1915 1922 1929 1936 1943 1950 1957 1964 1971 1978 1985 1992 1999 2006
USD per AUD
Float
Nominal Exchange Rate
UK pound per AUD
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2.1) Mining boom not over: just part way through second of three stages
Mining boom stages
Stage 1: Commodity prices rise, boosting incomes and motivating investment
Stage 2: Investment pick up owing to high commodity prices
Stage 3: Capacity comes on line and exports ramp up
Source: HSBC
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2.2) Commodity prices have peaked, but remain historically high
Source: RBA, HSBC
Australia's Commodity Prices 2008/09 = 100
0
40
80
120
160
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
0
40
80
120
160
In AUD
In USD
Index Index
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2.3) Free kick to income growth from rising commodity price has now passed
Source: ABS; RBA
-60
-40
-20
0
20
40
60
80
100
2001 2003 2005 2007 2009 2011-8
-4
0
4
8
12
16
20
24
Commodity prices (in AUD, LHS)
Nominal GDP (RHS)
Nominal GDP and Commodity PricesYear-ended percentage change% %
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2.4) But terms of trade still at a very high level, making investment worthwhile
Source: ABS, HSBC
Australia's Terms of Trade
40
60
80
100
120
1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014
F/CIndex
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2.5) Mining investment should make large contribution to growth this year and next
Source: ABS; HSBC estimates
Contribution to GDP from Engineering InvestmentYear-ended change
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2000 2002 2004 2006 2008 2010 2012 2014
%
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2.6) Much of the investment pipeline is for energy (LNG in particular)
Source: BREE, HSBC
Value of Advanced Mining Projects
0
50
100
150
200
1995 1998 2001 2004 2007 20100
50
100
150
200
$Abn
Energy
Mineral
Infrastructure
Minerals &Energy Processing
$Abn
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2.7) Export ramp-up has yet to come
Source: BREE
Australian Commodity Exports OutlookFinancial years
0
300
600
LNG
*Co
alIro
n or
e
LNG
*Co
alIro
n or
e
LNG
*Co
alIro
n or
e
LNG
*Co
alIro
n or
e
LNG
*Co
alIro
n or
e
LNG
*Co
alIro
n or
e
LNG
*Co
alIro
n or
e
LNG
*Co
alIro
n or
e
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
0
30
60
MtMtForecast
* Right hand side axis
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3.1) Some rebalancing expected: after some sectors slowed to make way for mining
Source: ABS; HSBC estimates
Employment Across IndustriesTrend, February 2007 = 100
100
105
110
2007 2008 2009 2010 2011 2012
100
105
110
Exchange rate sensitive industries*(33% of total)
Other industries(67% of total)
* Includes manufacturing, retail trade, accommodation and education
Index Index
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3.2) Keep in mind that Australia’s economy is mostly services
Source: ABS; RBA
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3.3) Growth needs to switch from being commodity-driven to credit-driven
40
80
120
160
200
240
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 20110
30
60
90
120
150
Terms of trade* (RHS)
*Ratio of export to import prices
Credit to GDP ratio (LHS)
Commodity price driven growthIndex Index
Source: ABS; RBA
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3.4) Credit growth has been weak, but domestic demand has been strong
Source: ABS; RBA
Domestic Demand and Credit Year-ended change
-4
-2
0
2
4
6
8
1997 1999 2001 2003 2005 2007 2009 2011-8
-4
0
4
8
12
16
% %
Growth in domestic demand (LHS)
Real Credit Growth(deflated by GNE deflator, RHS)
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3.5) Financial system still works in Australia, so credit growth is lifting
-20
-10
0
10
20
30
2000 2002 2004 2006 2008 2010 2012
-20
-10
0
10
20
30
Credit growthSix-month annualised
Business
% %
Housing
Personal
Source: RBA
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3.6) Lower rates mean that housing prices are picking up
Source: Rismark
Capital city housing prices
400
450
500
550
2006 2007 2008 2009 2010 2011 2012
400
450
500
550
$'000 $'000
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3.7) Housing building cycle likely to have troughed
Source: ABS; RBA; HSBC
Building Approvals - AustraliaNumber of buildings*
0
5
10
15
1995 1997 1999 2001 2003 2005 2007 2009 2011
0
5
10
15
'000s'000s
Total
Houses
Other*** Thick line represents trend numbers w hile the lighter line represents seasonally adjusted number** Includes non-residential buldings
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3.8) Households have already lifted their savings to elevated levels
Source: ABS, RBA
Household Saving Ratio*Per cent of disposable income
-5
0
5
10
15
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012-5
0
5
10
15
%
* Net of depreciation
%
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3.9) Household caution is reflected in easing housing prices
Source: RP Data / Rismark
0
1
2
3
4
5
6
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Housing price to income ratio
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3.10) Record number of outbound Australian tourists weakening domestic spending
Source: ABS
-4
-2
0
2
4
6
8
1977 1982 1987 1992 1997 2002 2007 2012
-4
-2
0
2
4
6
8
Short-term Arrivals and DeparturesAnnual rolling total
mn mn
Arrivals
Departures
Net flow
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3.11) Exchange rate effect is starting to wear off
Source: ABS
-5
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010 2011 2012
-30
-20
-10
0
10
20
30
Overseas departures and the exchange rateYear-ended percentage change
% %
AUD trade-weighted index (RHS)
Overseas departures (LHS)
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4.1) Growing Asian middle class will bring opportunities beyond mining
- Increased demand for housing and consumer durables;
- Increased demand for more and better quality food;
- Increased demand for education services;
- Increased demand for holidays;
- Increased demand for financial services
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4.2) Chinese motor vehicle sales still have a lot of catching up to do
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4.3) China should account for over a quarter of global car sales by 2018
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4.4) Food intake rising in developed countries
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4.5) Higher incomes lead to higher meat consumption and less grain
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4.6) China is driving Australia’s tourist arrivals numbers
Source: ABS
80
100
120
140
160
180
200
2007 2008 2009 2010 2011 2012
China (11%)
Australian Overseas Arrivals*Index January 2007 = 100
*Share of total in June 2012 in brackets
Other (12%)
Europe (18%)Asia ex China (32%)
US (7%) NZ (20%)
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5.1) Weak productivity growth remains Australia’s main challenge
Source: ABS
GDP per hour worked*Index (log scale)
4.60
4.70
4.80
4.90
5.00
5.10
5.20
1980 1984 1988 1992 1996 2000 2004 2008 2012
100
110
130
190
1980-851.6%pa
1985-900.9%pa
1990-951.7%pa
1995-002.6%pa
2000-051.9%pa
2005-111.0%pa
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5.2) Growth has been driven by working harder, not necessarily smarter
Source: ABS; HSBC
Factor Contribution to Potential GDP GrowthYear-ended
-2
0
2
4
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010-2
0
2
4
% %
Total factor productivity
Growth in capital stock
Growth in hours worked
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5.3) Weak productivity partly reflects the mining boom
1973/74-1993/94 1993/94-2003/04 2003/04-2010/11
Labour productivity 1.8 3.1 1.4of which:
Capital deepening 1.3 1.3 1.8Multifactor productivity 0.6 1.8 -0.4
Labour productivity - 3.1 1.7of which:
Capital deepening - 1.3 1.3Multifactor productivity - 1.9 0.4Source: RBA
Decomposition of trend productivity growthAnnual average percentage change
Selected market sector industries
Excluding mining and utilities
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5.4) Weak productivity boosted local inflation, but import prices have fallen
Source: ABS, RBA
Components of InflationYear-ended change
-4
-2
0
2
4
6
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-4
-2
0
2
4
6
Non-tradeables (domestic)
Tradeables(mostly imported)
% %
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5.5) Inflation low, largely due to AUD appreciation in 2009 and 2010
Source: ABS; RBA
Measures of Underlying InflationYear-ended change
0
1
2
3
4
5
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0
1
2
3
4
5Weighted median
Trimmed mean
CPI(excl vol items)
% %
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5.6) Wages growth remains solid
Source: ABS; RBA
Labour Price Index GrowthSeasonally adjusted
0
1
2
3
4
1999 2001 2003 2005 2007 2009 2011
0
1
2
3
4
Year-ended
Quarterly
% %
Six month annualised
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5.7) RBA rates are well below neutral
Source: RBA; HSBC
0
2
4
6
8
10
12
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Margin Cash rate Effective mortgage rate
% Variable mortgage rates and nominal cash rate
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51
Disclosure appendix Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Paul Bloxham
Important Disclosures This document has been prepared and is being distributed by the Research Department of HSBC and is intended solely for the clients of HSBC and is not for publication to other persons, whether through the press or by other means.
This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other investment products mentioned in it and/or to participate in any trading strategy. Advice in this document is general and should not be construed as personal advice, given it has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to their objectives, financial situation and needs. If necessary, seek professional investment and tax advice.
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Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues.
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research.
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Additional disclosures 1 This report is dated as at 12 October 2012. 2 All market data included in this report are dated as at close 12 October 2012, unless otherwise indicated in the report. 3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's
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