ANZ Group Holdings Limited · ASX:ANZ
ANZ — Aus Economics Oct 07
28 slides from ANZ's investor presentation, April 2008
Slide 1: Global outlook
1 Global outlook ¾ An de-synchronisation of the global growth cycle over the past six months is expected to shift to a broad based slowdown in the world economy by the end of 2008. - The effects of a global tightening of financial conditions will eventually mean slower growth in all the world’s majo
Slide 2: IMF estimates potential losses at US$945bn, of which banks' losses US$440-510bn
2 IMF estimates potential losses at US$945bn, of which banks’ losses are reckoned to be US$440-510bn… Estimated losses on Estimated mark-to-market unsecuritized loans losses on securities US$bn US$bn Type of loan Type of security Out- Estimated Out- Estimated standing losses standing losses Sub-prim
Slide 3: $250bn of which has been announced so far
3 ... $250bn of which has been announced so far The largest losses have been felt primarily by US-based banks UBS Merrill Lynch Citigroup Morgan Stanley HSBC JPMorgan Chase IKB Deutsche Washington Mutual European banks not Bank of America Deutsche Bank Credit Agricole Credit Suisse Wachovia Asian ba
Slide 4: The outlook for Australia
4 The outlook for Australia ¾ Although the Australian and US business cycles are no longer well correlated, the latest shock has been transmitted to Australia through highly globalised financial markets. There is little doubt that the combination of rising official interest rates and tighter financi
Slide 5: Australian and US business cycles are no longer well correlated
5 The Australian and US business cycles are no longer well correlated … 10 US Real GDP AUS Real GDP 8 6 YOY Change (Percent) 4 2 0 -2 Correlation coefficients: Mar-80 to Jun-01: +0.64 Sep-01 to Jun-07: -0.01 -4 82 84 86 88 90 92 94 96 98 00 02 04 06 Source: ANZ and Bloomberg
Slide 6: Australia is much less directly dependent on the US and OECD export markets
6 Australia is much less directly dependent on the US and other OECD export markets than it used to be Australia’s major export markets Advanced economies Developing economies 30 % of total (12-mth moving average) 20 % of total (12-mth moving average) Other North-East Asia 18 (Korea, Taiwan, HK) 25
Slide 7: Australia is exposed to the global credit crunch via its current account deficit financing
…and Australia is exposed to the global credit crunch as a result 7 of the way it has financed its large current account deficit Financing Australia’s current Net foreign debt, by borrower account deficit 100 A$ bn - 4-qtr moving total 100 % of total Private sector financial corporations 80 80 Curre
Slide 8: Interest rates paid by borrowers have risen more than official rates
Interest rates actually paid by borrowers have risen by a lot 8 more than official interest rates set by the RBA Mortgage rates Business loan rates 10.0 % pa 10.0 % pa Small business Standard variable overdraft rate 9.0 mortgage rate 9.0 3-yr fixed 8.0 rate 8.0 Large business 7.0 7.0 variable rate 6
Slide 9: Consumer confidence impacted heavily by recent events
9 Consumer confidence impacted heavily by recent events Consumer sentiment index 160 Index Time to buy a household 150 item 140 130 120 110 100 90 Consumer sentiment 80 70 97 98 99 00 01 02 03 04 05 06 07 08 Source: WBC-MI
Slide 10: Retail sales down for two consecutive months
10 Retail sales down for two consecutive months Nominal retail sales 20 Annual % ch 16 12 Total retail sales 8 HH 4 Total ex goods HH goods 0 -4 -8 01 02 03 04 05 06 07 08 Source: WBC-MI
Slide 11: Demand for household credit has also softened
11 Demand for household credit has also softened Household credit growth Housing finance approvals* 25 annual % ch. 14 $m Housing 20 12 Owner-occupier 15 10 10 8 Personal 5 6 0 4 Investor -5 2 -10 0 85 87 89 91 93 95 97 99 01 03 05 07 99 00 01 02 03 04 05 06 07 *Excluding refinancing Source: ANZ and
Slide 12: Household income and spending growth likely to slow significantly
12 Household income and spending growth are likely to slow significantly in response to tighter monetary and fiscal policy Household income and spending Household saving rate 10 Real % change from 6 % of disposable income year earlier Real household 8 disposable income 4 6 2 4 0 2 Real household con
Slide 13: Business confidence and conditions trending downwards
13 Business confidence and conditions trending downwards Surveyed business conditions and confidence 25 Index Business conditions 20 15 10 5 0 -5 Business confidence -10 -15 -20 97 98 99 00 01 02 03 04 05 06 07 08 Source: NAB
Slide 14: Business investment expectations likely to be scaled back
14 Business investment expectations likely to be scaled back Actual and projected capital expenditure Mining Other industries 90 % change 30 % change 80 (current prices) (current prices) 25 70 60 20 50 15 40 10 30 5 20 10 0 0 -5 01 02 03 04 05 06 07 08 09 01 02 03 04 05 06 07 08 09 Manufacturing Tot
Slide 15: Business credit growth eases: demand or supply?
15 Business credit growth eases: is this due to easing demand or supply? Business credit growth 30 % change Annualised 25 quarterly 20 15 10 Annual 5 0 -5 00 01 02 03 04 05 06 07 08 Sources: Reserve Bank of Australia
Slide 16: Tighter financial conditions will slow domestic demand
Tighter financial conditions will likely see a significant slowing in 16 domestic demand over the next eighteen months Spending and output 8 Real % change from year earlier 7 Domestic 6 final demand 5 4 3 2 GDP 1 (output) 0 -1 -2 01 02 03 04 05 06 07 08 09 Sources: Australian Bureau of Statistics; A
Slide 17: Forward looking indicators point to slower employment growth
17 Forward looking indicators are already pointing to slower employment growth Job vacancies and employment 50 Annual % ch Annual % ch 5 40 4 30 Employment growth 20 3 10 0 2 -10 Job vacancies 1 -20 -30 0 98 99 00 01 02 03 04 05 06 07 08 Sources: Australian Bureau of Statistics; ANZ.
Slide 18: Labour market deterioration will be gradual
... but the deterioration in labour market conditions will be gradual 18 in the presence of skill shortages and labour hoarding Businesses reporting labour shortages Employment and unemployment % of businesses nominating 4.0 % change from % 8 35 'suitable labour' as a constraint year earlier on outp
Slide 19: Coal and iron ore price rises will lift commodity price cycle
Rises in coal and iron ore export prices will deliver a further leg 19 upwards in Australia’s commodity price cycle in 2008-09 Australian export commodity Australia’s “terms of trade” prices 300 2001-02 = 100 140 2005-06 = 100 (US$ terms) 275 130 Near-term jump reflects higher 250 coal & iron ore 12
Slide 20: This will boost Australia's income by another 2% in 2008-09
This will boost Australia’s income by another 2% in 2008-09, on 20 top of 11% from terms of trade gains already so far this decade Australia’s real gross domestic income and output Expected rise in 8 Real % change from Real gross domestic coal & iron ore year earlier income (GDI = GDP prices will ad
Slide 21: Tax cuts mean fiscal policy will recycle income to households
Tax cuts from 1 July mean that fiscal policy will continue to be 21 recycle income from the corporate sector to households Australian income Net saving by sectors of tax collections the Australian economy 13.5 % of GDP % of GDP 6.0 6 % of GDP (4-qtr moving average) Companies 5 Business (right scale)
Slide 22: It will take time for slower growth to alleviate capacity constraints
It will take some time for slower growth to help alleviate serious 22 capacity constraints Indicators of ‘spare capacity’ in the Australian economy Unemployment rate Capacity utilization rate 12 % of the labour force 86 % 11 84 10 9 82 8 80 7 6 78 5 76 4 3 74 88 92 96 00 04 08 88 92 96 00 04 08 Busi
Slide 23: Housing is increasingly in short supply, putting upward pressure on rents
23 Housing is increasingly in short supply, putting upward pressure on rents Australian housing market fundamentals Housing supply and demand Capital city house prices 200 '000s (annual rate) 25 % change from year earlier Underlying demand 180 20 160 15 140 10 Completions 120 5 100 0 00 01 02 03 04
Slide 24: High inflation remains a serious concern
24 High inflation (reflecting demand growth in excess of supply potential as well as global factors) remains a serious concern Consumer prices Measures of labour costs 4.5 % change from year earlier 6 % change from year earlier Wage cost 'Headline' index 4.0 'Underlying' 4 (weighted median) 2 Unit l
Slide 25: The 1% increase in official rates should now be 'enough' for the RBA
The 1% increase in official rates since August, combined with the 25 effects of the credit crunch, should now be ‘enough’ for the RBA Short-term interest rates z The RBA tightened monetary policy aggressively in late 2007 and early 8.5 % pa 2008. z Mortgage rates have risen by an 8.0 additional ~0.4
Slide 26: Support for the A$ will erode next year
Support for the A$ from commodity prices and interest rate 26 differentials will erode next year A$ and commodity prices A$ and interest rate spreads 1.00 US ¢ 2001-02 = 100 300 1.00 US ¢ 2001-02 = 100 700 A$ vs US$ 0.95 275 0.95 (left scale) 600 0.90 0.90 250 A$ vs US$ 500 0.85 (left scale) 0.85 22
Slide 27: Summary
27 Summary z The US sub-prime mortgage crisis has morphed into a fully-fledged global credit crunch – the US economy may fall into recession (though it probably isn’t there yet) – Europe and Japan are also likely to experience significantly weaker economic growth z Developing Asian and other emergin
Slide 28: www.anz.com
28 The material in this presentation is general background information about the Bank’s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors