Business OutlookBusiness OutlookCEDA’s Economic & Political Overview 2006
Perth16 February 2006
Executive Summary
Economic overview: this time last year
iChina’s insatiable demand for raw materials had led to a favourable commodity supply/demand d i i i ifi t i ti i t ditidynamic causing a significant appreciation in most commodities.
i This fuelled strong growth in the Australian economy and stock market.
– The Australian stock market had risen 55% in Australian Dollar terms and over 100% in US dollar terms from 2003-2005.
– WA in particular was highly leveraged to the Chinese boom.p g y g
iRobust balance sheets led to corporate activity, particularly in the resource sector.
– The biggest of which was BHP’s circa A$9b takeover of WMC.The biggest of which was BHP s circa A$9b takeover of WMC.
iHowever, we did warn of certain storm clouds emerging…
– Economy was approaching full capacityEconomy was approaching full capacity.
– Input costs were rising, impacting margins.
– Interest rates were poised to rise– Interest rates were poised to rise.
Executive Summary
Global growth has been strong, largely fuelled by the US and China.
US & China Rest of the world
i US– Housing Bubble
i Japan– Recovering stronglyHousing Bubble
– Wealth effect consumption– Inflationary concerns– High energy prices
i China
Recovering stronglyi Rest of Asia
– Buoyanti Europe
– Continues to disappointi China– Strong performance but:
Growth slowingOvercapacityN f i l
Continues to disappointi South America
– Signs of recovery although underinvestment is a concern
i AfricaNon performing loansPolitical dissent
Africa– Good growth potential but relies on
political stability
Globally
i Clash of ideologies and the risk of a pandemic are a threat to global stability
Executive Summary
Buoyant commodity and energy prices have driven much of Australia’s recent strong economic performance. However, Australia can be seen as two distinct economies:
WA & QLD Rest of Australia
St dit d d h l d t F t d th t i GSP 2 5% ii Strong commodity demand has led to forecasted GSP growth rates of 5% in WA and 4.5% in QLD for 2006.
i Strong balance sheets have enabled
i Forecasted growth rates in GSP are 2.5% in SA, 1.5% in ACT, 2.75% in NSW and 3% in Vic.
i Housing markets in NSW and Victoria areincreased business investment, with dramatic investment in the resource sector and allied support industries.
i High demand for new dwellings is persisting,
i Housing markets in NSW and Victoria are well off their peak, reducing debt based consumption.
i Moderation in growth of household spending.g g p g,increasing consumption but distorting resources.
i Economies are at full capacity with constraints starting to bite:
Australia wideconstraints starting to bite:
– Public sector capital works are competing for labour
– Other input costs are rising
i Signs that Australia’s long expansionary period is vulnerable to external shocks.
US
Recent housing boom significantly contributed to solid economic performance.
iUS has defied many critics with strong economic growth.
iEconomic growth has been largely driven by consumer spending. However, a large proportion of this spending has been financed from borrowing against capital gains on homes.
iChief Economist at Merrill Lynch, David Rosenberg, believes that housing accounted for 50% of US GDP growth in the first half of 2005.
iHowever, continued high energy prices are likely to undermine consumer confidence as , g gy p yinflationary concerns lead to fears that interest rates will rise.
iNot only is the US economy exposed if housing prices cool off, but housing booms negatively affect productivity by diverting resources into consumer spending away from more productiveaffect productivity by diverting resources into consumer spending, away from more productive uses.
iHope is that business investment will take up the slack.
US housing market has soared
The share price of the US’s largest home builder reflects the recent housing boom.
ce $) 45
50
Pulte Homes Share Price
Shar
e Pr
ic
(US$
35
40
45
20
25
30
5
10
15
0
5
1991 1993 1995 1997 1999 2001 2003 2005Time
Source: Bloomberg
Time
High oil prices are balanced by soaring housing prices
But how long can the housing bubble last? Real Oil Price
US House Price Ratio
5.0 70to
me
Housing price ratio to average income vs real oil prices
S$)1
4.6
50
60
Pric
e R
atio
ter
age
Inco
m
il Pr
ice
(US“Measured by increase in asset values over
the past five years, the global housing boom is the biggest financial bubble in history”
3.8
4.2
30
40
US
Hou
se P
Ave
Rea
l O
3.4
3.8
10
20
U
3.02000 2001 2002 2003 2004 2005
0
YearYear
Source: The Economist
1 Adjusted to 2005 Prices
US twin deficit
Due to a lack of domestic saving, America relies on increasingly large inflows of foreign capital.
General-government fiscal balance
Current account
1.3
United States’ Twin Deficit
DP
Current-account balance
0.1
0.6
0 7
% o
f GD
-1.1-0.7
-1.7
-2.4
-4.0
-4 6
-4.0-3.7
-3.9
-3.2
-4.2-3.8
-4.54 74.6 -4.7
-5.7
-6.5 -6.66.6
Financial Year
China
China’s economy has been the driver of the world economy.
i The World Bank has forecast China’s economy to grow by 9.2% in 2006.
iBy some measures China’s economic expansion has contributed fully a third of global economic growth in recent years.growth in recent years.
i This “China Boom” is responsible for much of the Australian share market’s amazing run. This is d t A t li ’ l t th i i tdue to Australia’s leverage to the mining sector.
i The effect on growth has been particularly pronounced in WA and QLD, causing fullThe effect on growth has been particularly pronounced in WA and QLD, causing full employment and fuelling rising housing prices.
Chinese commodity imports and exports
China’s imports and exports of commodities has exploded since 1999.
S$ 00)
Chinese Imports Chinese Exports
400400
S$ 0) Steel Exports
US
ndex
(Bas
e 10
300
350
300
350
US
dex
(Bas
e 10
Petroleum Imports
In
150
200
250
150
200
250 InIron Ore Imports
50
100
1999 2000 2001 2002 2003 2004 200550
100
1999 2000 2001 2002 2003 2004 2005
Year Year
1999 2000 2001 2002 2003 2004 20051999 2000 2001 2002 2003 2004 2005
Source : Bloomberg
China’s importance to WA exports
ChinaJapanKoreaOther
China’s share of WA exports has increased since 1997.
1997 – Exports by destination 2005 – Exports by destination
17%7%
25%
22%53%
57%
8%
11%
0%0% 8%
Source : Australian Bureau of Statistics, WA Department of Treasury and Finance
Chinese warning signs
There are signs that this “China Boom” may be slowing…
i In only 3 years, Chinese steel production has increased 3 fold to 360 million tonnes per annum. This is significantly larger than either the US or EU production of 93 and bi ne
)
HRC Steel PricesChina
7,000either the US or EU production of 93 and 186 million tonnes respectively.
i This phenomenal growth has flowed into
Ren
mim
(per
tonn
5,000
6,000
the development of iron ore and coal mines as well as a plethora of related infrastructure. 3,000
4,000
iHowever, as capacity has increased, Chinese steel prices have fallen.
1,000
2,000
2001 2002 2003 2004 2005
Year
2001 2002 2003 2004 2005
Source: Bloomberg
Chinese warning signs
Shipping rates, which are another leading indicator of the Chinese economy, have also slumped over the last year.
7,080
Baltic Dry Index of Shipping Rates
5,080
6,080
3,080
4,080
1,080
2,080
80
,
2001 2002 2003 2004 2005 2006Year
Source: Bloomberg
Year
Chinese warning signs
Other indicators that the Chinese dragon is slowing include:
– Year-on-year growth in China’s crude oil imports dropped from over 35% in 2003-2004 to j t 3 5% i 2004 2005just 3.5% in 2004-2005.
– Property prices in some of the big Chinese cities have fallen.
iWhat does this mean?What does this mean?
– Chinese companies continue to target output over profit.
– Expansion has been funded through the availability of cheap money.
– Has led to problems in the banking sector, with some estimates of underperforming loans at 40%.
iOversupply!Oversupply!
– It is likely that when the boom in China subsides, there will be serious excess supply in the economy.
Thi d t b d ll f th t f th ld Chi ’ d i i th f t– This does not bode well for the rest of the world, as China’s dominance in the manufacture of electrical and textile goods, coupled with its excess supply, could see cheap Chinese goods flooding the international markets…trade wars?
Rest of world
If China and the US begin to slow we must look elsewhere for increased aggregate demand.
Western EuropeStagnant High unemployment
Eastern EuropePoised for rapid growth butStagnant. High unemployment
reflects region’s lack of competitiveness. Euro zone zeal turning into malaise.
Poised for rapid growth, but hard not to doubt growth’s effectiveness in a region plagued by large income disparity and graft.
JapanReformist Koizumi recently elected amidst a new phase of potentially sustainable economic growth. Recovery well under way.
Rest of AsiaSouth America
I di
Buoyant, yet higher energy prices could have destabilizing effect.
South AmericaInflation remains low.Signs of a recovery.Underinvestment a concern.Inter and Intra Continental trade agreements are
IndiaFull of promise but yet to deliver.Buoyed by continued demand for textiles and growing i t t
AfricaExpected to produce overall
gpromising.
investment. Excessive birth rates, inefficient bureaucracy and threat of war are barriers to long run growth.
p pgrowth rates in excess of 6%. However growth is segmented and reliant on political stability.
Energy: oil, gas and uranium
iCurrent supply and demand equation is being driven by low supply of Sweet Light Oil, and high d d
Energy prices are crucial to Australia’s economic performance.
demand.
i Large investment being made to develop capacity to refine Heavy Crude Oil.
A i d l ki k i d th i d d f Chi f ll i h ld b i t f lliAs increased supply kicks in and growth in demand from China falls prices should begin to fall: China accounted for 38% of the growth in world oil demand over the past four years.
iBut we can be very optimistic that there will continue to be strong demand for natural gas as a cleaner and more environmentally friendly alternative.
iUranium could emerge as a major new source of export revenue if the State Government changes its stance.changes its stance.
iSo far higher energy prices haven’t lead to higher inflation and interest rates, but have:
– Dampened consumer sentiment and changed US car buying habitsDampened consumer sentiment and changed US car buying habits
– Led to policy changes relating to renewable energy sources
Commodities
A key factor affecting commodity prices is the substantial growth in hedge funds …
Hedge Fund Assets
men
tlio
ns 934
900
1000
Hedge Fund Assets
r Man
agem
US
$ B
il
592650
795
700
800
900
sets
Und
er
324
408
564592
400
500
600
Ass
99 76 97130
210 221
324
200
300
35 5076
0
100
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
YearYear
Commodities
… this has led to a marked increase in hedge fund speculation in commodities, ‘artificially’ pushing prices higher, even as fundamentals start to weaken.
ue 0)
USD Prices of Key Global Commodities
6 Years
USD Prices of Key Global Commodities
1 Year
300
ue 0)
150
Inde
x Va
lu(B
ase=
10
200
250
Inde
x Va
lu(B
ase=
100
Aluminium
100150
200
Aluminium
50Jan-05 Apr-05 Jul-05 Oct-05 Jan-06
50
100
2000 2001 2002 2003 2004 2005 2006 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06
Year Year
2000 2001 2002 2003 2004 2005 2006
Source : Bloomberg
Commodities
… this has led to a marked increase in hedge fund speculation in commodities, ‘artificially’ pushing prices higher, even as fundamentals start to weaken.
ue 0)
USD Prices of Key Global Commodities
6 Years
USD Prices of Key Global Commodities
1 Year
300
ue 0)
Inde
x Va
lu(B
ase=
10
150
200
250
Inde
x Va
lu(B
ase=
100
Aluminium
100150
200Nickel
Aluminium Nickel
50Jan-05 Apr-05 Jul-05 Oct-05 Jan-06
50
100
2000 2001 2002 2003 2004 2005 2006
Year Year
Jan 05 Apr 05 Jul 05 Oct 05 Jan 062000 2001 2002 2003 2004 2005 2006
Source : Bloomberg
Commodities
… this has led to a marked increase in hedge fund speculation in commodities, ‘artificially’ pushing prices higher, even as fundamentals start to weaken.
ue 0)
USD Prices of Key Global Commodities
6 Years
USD Prices of Key Global Commodities
1 Year
300
ue 0)
Inde
x Va
lu(B
ase=
10
150
200
250
Inde
x Va
lu(B
ase=
100
Gold
GoldAluminium
100150
200 GoldNickel
Aluminium Nickel
50Jan-05 Apr-05 Jul-05 Oct-05 Jan-06
50
100
2000 2001 2002 2003 2004 2005 2006
Year Year
Jan 05 Apr 05 Jul 05 Oct 05 Jan 062000 2001 2002 2003 2004 2005 2006
Source : Bloomberg
Commodities
… this has led to a marked increase in hedge fund speculation in commodities, ‘artificially’ pushing prices higher, even as fundamentals start to weaken.
ue 0)
USD Prices of Key Global Commodities
6 Years
USD Prices of Key Global Commodities
1 Year
300
ue 0)
Inde
x Va
lu(B
ase=
10
150
200
250
Inde
x Va
lu(B
ase=
100
Lead
Gold
GoldAluminium
100150
200 GoldNickel
Aluminium
Lead
Nickel
50Jan-05 Apr-05 Jul-05 Oct-05 Jan-06
50
100
2000 2001 2002 2003 2004 2005 2006
Year Year
Jan 05 Apr 05 Jul 05 Oct 05 Jan 062000 2001 2002 2003 2004 2005 2006
Source : Bloomberg
Commodities
… this has led to a marked increase in hedge fund speculation in commodities, ‘artificially’ pushing prices higher, even as fundamentals start to weaken.
ue 0)
USD Prices of Key Global Commodities
6 Years
USD Prices of Key Global Commodities
1 Year
300
ue 0)
Inde
x Va
lu(B
ase=
10
150
200
250
Inde
x Va
lu(B
ase=
100
CopperLead
Gold
Copper
GoldAluminium
100150
200 GoldNickel
Aluminium
Lead
Nickel
50Jan-05 Apr-05 Jul-05 Oct-05 Jan-06
50
100
2000 2001 2002 2003 2004 2005 2006
Year Year
Jan 05 Apr 05 Jul 05 Oct 05 Jan 062000 2001 2002 2003 2004 2005 2006
Source : Bloomberg
Commodities
… this has led to a marked increase in hedge fund speculation in commodities, ‘artificially’ pushing prices higher, even as fundamentals start to weaken.
ue 0)
USD Prices of Key Global Commodities
6 Years
USD Prices of Key Global Commodities
1 Year
300
ue 0)Crude Oil
150
Inde
x Va
lu(B
ase=
10
200
250
Inde
x Va
lu(B
ase=
100Crude Oil
CopperLead
Gold
Crude OilCopper
GoldAluminium
100150
200 GoldNickel
Aluminium
Lead
Nickel
50Jan-05 Apr-05 Jul-05 Oct-05 Jan-06
50
100
2000 2001 2002 2003 2004 2005 2006 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06
Year Year
2000 2001 2002 2003 2004 2005 2006
Source : Bloomberg
Australia
Economic Overview
iAustralia’s current run of economic growth has been impressive, surpassing any previous run i f d tisince federation.
i Improved terms of trade has translated to gains of over $2,000pa per Australian since 1999.
With th ti f WA d QLD th h i b t biWith the exception of WA and QLD the housing boom appears to be over.
i The end of the housing boom has substantially lowered borrowing against actual/expected increases in housing prices. As a result consumer spending is slowing.
iCommodity demand from China is partially offsetting the slowing consumer demand especially in WA and QLD.
iCosts are experiencing upward pressure as the economy continues to operate near full capacity.
i Inflationary concerns may lead the RBA to raise the cash rate further.Inflationary concerns may lead the RBA to raise the cash rate further.
iNarrow interest rate spreads and weakening commodity prices could see the A$ fall further in 2006.
Australia’s relative stock market performance
The Australian stock market has performed exceptionally well against its peers over the last 2 years.
ue 00)
Global Indices3 Years
200
ue 0)
Global Indices1 Year S&P
120
Inde
x Va
lu(B
ase
10
160
180
Inde
x Va
lu(B
ase
10
100120
140
802005 2006
80
100
2003 2004 2005 2006
Year
2003 2004 2005 2006
Year
Source : Bloomberg
Australia’s relative stock market performance
The Australian stock market has performed exceptionally well against its peers over the last 2 years.
FTSE
ue 00)
Global Indices3 Years
200
ue 0)
Global Indices1 Year S&P
FTSE
120
Inde
x Va
lu(B
ase
10
160
180
Inde
x Va
lu(B
ase
10
100120
140
802005 2006
80
100
2003 2004 2005 2006
Year
2003 2004 2005 2006
Year
Source : Bloomberg
Australia’s relative stock market performance
The Australian stock market has performed exceptionally well against its peers over the last 2 years.
FTSEWorld
ue 00)
Global Indices3 Years
200
ue 0)
Global Indices1 Year S&P
FTSE
120
Inde
x Va
lu(B
ase
10
160
180
Inde
x Va
lu(B
ase
10
100120
140
802005 2006
80
100
2003 2004 2005 2006
Year
2003 2004 2005 2006
Year
Source : Bloomberg
Australia’s relative stock market performance
The Australian stock market has performed exceptionally well against its peers over the last 2 years.
FTSEWorld
ue 00)
Global Indices3 Years
200
ue 0)
Global Indices1 Year Nikkei S&P
FTSE
120
Inde
x Va
lu(B
ase
10
160
180
Inde
x Va
lu(B
ase
10
100120
140
802005 2006
80
100
2003 2004 2005 2006
Year
2003 2004 2005 2006
Year
Source : Bloomberg
Australia’s relative stock market performance
The Australian stock market has performed exceptionally well against its peers over the last 2 years.
ASX FTSEWorld
ue 00)
Global Indices3 Years
200
ue 0)
Global Indices1 Year
ASXNikkei S&P
FTSE
120
Inde
x Va
lu(B
ase
10
160
180
Inde
x Va
lu(B
ase
10
100120
140
802005 2006
80
100
2003 2004 2005 2006
Year
2003 2004 2005 2006
Year
Source : Bloomberg
Currency trends
Strong commodity prices and a positive interest rate differential led to a marked appreciation of the Australian dollar against the US$ and Japanese Yen over the last 6 years. However, this trend has slowed over the past year.
Trends of Key Global Currencies6 Years
140
Trends of Key Global Currencies1 Year
120
Inde
x Va
lue
(Bas
e 10
0)
120
140
Inde
x Va
lue
(Bas
e 10
0)
JPY/AUD
100100
JPY/AUD
8060
80
2005 2006
Year
2000 2001 2002 2003 2004 2005 2006
Year
Source : Bloomberg
Currency trends
Strong commodity prices and a positive interest rate differential led to a marked appreciation of the Australian dollar against the US$ and Japanese Yen over the last 6 years. However, this trend has slowed over the past year.
Trends of Key Global Currencies6 Years
140
Trends of Key Global Currencies1 Year
120
Inde
x Va
lue
(Bas
e 10
0)
120
140
Inde
x Va
lue
(Bas
e 10
0)
JPY/AUD
USD/AUD
100100
USD/AUD
USD/AUDJPY/AUD
8060
80
2005 2006
Year
2000 2001 2002 2003 2004 2005 2006
Year
Source : Bloomberg
Currency trends
Strong commodity prices and a positive interest rate differential led to a marked appreciation of the Australian dollar against the US$ and Japanese Yen over the last 6 years. However, this trend has slowed over the past year.
Trends of Key Global Currencies6 Years
140
Trends of Key Global Currencies1 Year
120
Inde
x Va
lue
(Bas
e 10
0)
120
140
Inde
x Va
lue
(Bas
e 10
0)
JPY/AUD
USD/AUD
100100 EUR/AUD
USD/AUDEUR/AUD
USD/AUDJPY/AUD
8060
80
2005 2006
Year
2000 2001 2002 2003 2004 2005 2006
Year
Source : Bloomberg
Company profits
In particular, the share price performance of Australia’s commodity and energy players has been strong, but experienced recent buffeting.
A t li d h i
300
ue 00)
Australian resource and energy company share pricesIndex
200
250
Inde
x Va
lu(B
ase=
10
Woodside
150
200
100
50 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06
Time
Source : Bloomberg
Company profits
In particular, the share price performance of Australia’s commodity and energy players has been strong, but experienced recent buffeting.
A t li d h i
300
ue 00)
Australian resource and energy company share pricesIndex
200
250
Inde
x Va
lu(B
ase=
10
WoodsideOil Search
150
200 Oil Search
100
50 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06
Time
Source : Bloomberg
Company profits
In particular, the share price performance of Australia’s commodity and energy players has been strong, but experienced recent buffeting.
A t li d h i
300
ue 00)
Australian resource and energy company share pricesIndex
200
250
Inde
x Va
lu(B
ase=
10
WoodsideOil Search
150
200RIOOil Search
100
50 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06
Time
Source : Bloomberg
Company profits
In particular, the share price performance of Australia’s commodity and energy players has been strong, but experienced recent buffeting.
A t li d h i
300
ue 00)
Australian resource and energy company share pricesIndex
200
250
Inde
x Va
lu(B
ase=
10
WoodsideOil Search
150
200RIOEnergy Resources
Oil Search
100
50 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06
Time
Source : Bloomberg
Company profits
In particular, the share price performance of Australia’s commodity and energy players has been strong, but experienced recent buffeting.
A t li d h i
300
ue 00)
Australian resource and energy company share pricesIndex
200
250
Inde
x Va
lu(B
ase=
10
WoodsideOil Search
150
200
BHP
RIOEnergy Resources
Oil Search
100
50 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06
Time
Source : Bloomberg
Company profits
In particular, the share price performance of Australia’s commodity and energy players has been strong, but experienced recent buffeting.
A t li d h i
300
ue 00)
Australian resource and energy company share pricesIndex
200
250
Inde
x Va
lu(B
ase=
10
WoodsideOil Search
150
200
BHP
RIOEnergy Resources
Oil Search
Newcrest
100
50 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06
Time
Source : Bloomberg
Individual company performances
WA’s most significant energy/resource players have experienced a similar trend.
300
D$
00)
2 Years
600
D$ 0)
1 Years
Paladin
200
250AU
Dnd
ex (B
ase
10
350400450500550
Paladin AU
Dnd
ex (B
ase
10
100
150
In
150200250300350 In
0
50
2005 20060
50100150
2004 2005 2006
Year
2004 2005 2006
Year
Source : Bloomberg
Individual company performances
WA’s most significant energy/resource players have experienced a similar trend.
300
D$
00)
2 Years
600
D$ 0)
1 Years
Paladin
200
250AU
Dnd
ex (B
ase
10
350400450500550
Paladin AU
Dnd
ex (B
ase
10
RCR Tomlinson RCR Tomlinson
100
150
In
150200250300350 In
0
50
2005 20060
50100150
2004 2005 2006
Year
2004 2005 2006
Year
Source : Bloomberg
Individual company performances
WA’s most significant energy/resource players have experienced a similar trend.
300
D$
00)
2 Years
600
D$ 0)
1 Years
Paladin
200
250AU
Dnd
ex (B
ase
10
350400450500550
Paladin AU
Dnd
ex (B
ase
10
SummitRCR Tomlinson RCR Tomlinson
100
150
In
150200250300350 Summit In
0
50
2005 20060
50100150
2004 2005 2006
Year
2004 2005 2006
Year
Source : Bloomberg
Individual company performances
WA’s most significant energy/resource players have experienced a similar trend.
300
D$
00)
2 Years
600
D$ 0)
1 Years
Paladin
200
250AU
Dnd
ex (B
ase
10
350400450500550
Paladin AU
Dnd
ex (B
ase
10
RCR Tomlinson
Fortescue
Summit
RCR Tomlinson
100
150
In
150200250300350 Summit
Fortescue
In Fortescue
0
50
2005 20060
50100150
2004 2005 2006
Year
2004 2005 2006
Year
Source : Bloomberg
Individual company performances
WA’s most significant energy/resource players have experienced a similar trend.
300
D$
00)
2 Years
600
D$ 0)
1 Years
Paladin
200
250AU
Dnd
ex (B
ase
10
350400450500550
Paladin AU
Dnd
ex (B
ase
10
RCR Tomlinson
Fortescue
SummitCazaly
RCR Tomlinson
100
150
In
150200250300350 Summit
Fortescue
In
Cazaly
Fortescue
0
50
2005 20060
50100150
2004 2005 2006
Year
2004 2005 2006
Year
Source : Bloomberg
Individual company performances
WA’s most significant energy/resource players have experienced a similar trend.
300
D$
00)
2 Years
600
D$ 0)
1 Years
Paladin
200
250AU
Dnd
ex (B
ase
10
350400450500550
Paladin AU
Dnd
ex (B
ase
10
RCR Tomlinson
Fortescue
SummitKagara
Cazaly
RCR Tomlinson
100
150
In
150200250300350 Summit
Fortescue
Kagara
In
Cazaly
Fortescue
0
50
2005 20060
50100150
2004 2005 2006
Year
2004 2005 2006
Year
Source : Bloomberg
Individual company performances
WA’s most significant energy/resource players have experienced a similar trend.
300
D$
00)
2 Years
600
D$ 0)
1 Years
Paladin
200
250AU
Dnd
ex (B
ase
10
350400450500550
Paladin AU
Dnd
ex (B
ase
10
Fortescue
SummitKagara
Cazaly
RCR TomlinsonRCR Tomlinson
100
150
In
150200250300350 Summit
Fortescue
W tKagara
In Fortescue
Western AreasCazaly
0
50
2005 20060
50100150
2004 2005 2006
Western Areas
Year
2004 2005 2006
Year
Source : Bloomberg
Individual company performances
National Performers
300
D$
00)
2 Years
600
D$ 0)
1 Years
Monadelphous
200
250AU
Dnd
ex (B
ase
10
350400450500550
AU
Dnd
ex (B
ase
10
Monadelphous
100
150
In
150200250300350 In
0
50
2005 20060
50100150
2004 2005 2006
Year
2004 2005 2006
Year
Source : Bloomberg
Individual company performances
National Performers
300
D$
00)
2 Years
600
D$ 0)
1 Years
Monadelphous
200
250AU
Dnd
ex (B
ase
10
350400450500550
AU
Dnd
ex (B
ase
10
Worley
Monadelphous
100
150
In
150200250300350 In
Worley
0
50
2005 20060
50100150
2004 2005 2006
Year
2004 2005 2006
Year
Source : Bloomberg
Individual company performances
National Performers
300
D$
00)
2 Years
600
D$ 0)
1 Years
Monadelphous
200
250AU
Dnd
ex (B
ase
10
350400450500550
AU
Dnd
ex (B
ase
10
Worley
Monadelphous
100
150
In
150200250300350 In United
WorleyUnited
0
50
2005 20060
50100150
2004 2005 2006
Year
2004 2005 2006
Year
Source : Bloomberg
WA unemployment
The unemployment rate in WA has fallen as a result and labour availability is an issue.te %
)
Unemployment rateWestern Australia v Australia
6.0
ploy
men
t rat (%
Australia
4.0
Une
mp
WA
2.0
0.0Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06
TimeTime
Source : Bloomberg, Australian Bureau of Statistics
WA economic growth
WA’s leverage to Asia provides a favourable economic growth outlook.
10.0%th %)
WA Gross State Product Growth
Forecast
8.0%Gro
wt (%
4.0%
6.0%
0 0%
2.0%
-2.0%
0.0%1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
TimeTime
Source: Bloomberg, Western Australian Department of Treasury and Finance
To recap…
iAustralia (particularly WA) still basking in the China effect glow.
i Stock and property markets (particularly in WA) have been exceptional f t thperformers over recent months.
iFuture performance will be driven by global, not domestic, factors.
iCracks appearing in macro/global environment.
iWill see financial markets react first, then property.
iSheer amount of real and committed money being spent in WA means time to prepare.
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PO Box Z5340Perth Western Australia 6831
Level 33 Exchange PlazaLevel 33 Exchange Plaza2 The Esplanade Perth Western Australia 6000
Phone: +61 8 6263 0888Fax: +61 8 6263 0878
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