Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Corporate Update (August 2006)
58 slides from Anz's corporate update, Aug 10, 2006
Slide 1: Economics Update
Economics Update Australia and New Zealand Banking Group Limited 19 July 2006 Cam Bagrie – NZ Chief Economist Paul Braddick – Head of Financial System Tony Pearson – Head of Australian Economics
Slide 2: Global Economy
Global Economy
Slide 3: World economic growth heading for strongest sustained period since early 1970s
Sources: National agencies, IMF, OECD and Economics@ANZ. World economic growth 40 year average Heading for the strongest sustained period of global growth since the early 1970s Note: GDP based on 50 countries aggregated using ‘purchasing power parity’ weights. 0 1 2 3 4 5 6 7 66 71 76 81 86 91 96 01
Slide 4: Global growth increasingly driven by developing economies
Global growth is being increasingly driven by developing economies Real GDP growth Sources: IMF, World Economic Outlook; Angus Maddison, The World Economy: Historical Statistics; Economics@ANZ. Shares of world GDP 0 1 2 3 4 5 6 7 8 9 70 74 78 82 86 90 94 98 02 06 Real % change from previous year 'Em
Slide 5: Strong global demand leads to high commodity prices, now looking to peak
Strong global demand leads to high commodity prices, although now look to be peaking. 0 50 100 150 200 250 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 $ US RBA commodity price index (US$) Crude oil (US$/bbl) Coking coal (US$/tonne) Iron ore (US$/tonne)
Slide 6: RBA commodity price index
RBA Commodity price index Strong global growth has boosted hard commodity prices to record levels, but not rural Source: RBA 80 100 120 140 160 180 200 220 01 02 03 04 05 index rural non-rural total
Slide 7: Australian Economy
Australian Economy
Slide 8: Australia's terms of trade hits 2 year high
Source: ABS Terms of Trade Australia’s terms of trade hits 32 year high 70 80 90 100 110 120 130 60 65 70 75 80 85 90 95 00 05 Index
Slide 9: Commodity price boom has boosted income growth
Source: ABS. Australian economic growth The commodity price boom has dramatically boosted income growth -3 -2 -1 0 1 2 3 4 5 6 7 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 % change,annual GDP Real Domestic Income
Slide 10: Strong share market imparting a positive wealth effect
Source: ABS Equity market prices growth US S&P 500 Australian ASX 200 UK FTSE 100 Japan Nikkei 225 Strong share market is imparting a positive wealth effect 80 90 100 110 120 130 140 150 160 170 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Index
Slide 11: Energy and materials stocks have lifted the Australian market
Source: ABS Energy and materials stocks have lifted the Australian market Australian equity market by industry sector Energy Consumer Staples Finance Consumer Discretionary Telecoms Materials 60 110 160 210 260 310 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Index
Slide 12: Oil price rebounds to historical highs
Oil price rebounds to historical highs Source: Datastream 0 10 20 30 40 50 60 70 80 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 $ US Crude oil (US$/bbl)
Slide 13: Fall in large passenger vehicle sales as fuel becomes more expensive
Cents per litre (ULP) * Includes new category of ‘upper large PMV’ from Dec 2004. Fall in large passenger vehicle sales as fuel becomes more expensive is hurting domestic manufacturers 12 mth rolling aggregate sales Source : VFACTS, Economics@ANZ 140,000 150,000 160,000 170,000 180,000 190,000 200,0
Slide 14: Recent spike in fuel price could hurt retail sales
Source: ABS Recent spike in fuel price could hurt retail sales 0.0 0.2 0.4 0.6 0.8 1.0 1.2 01 02 03 04 05 70 80 90 100 110 120 130 140 % monthly change trend Retail Sales (LHS) Petrol price (RHS) cents litre
Slide 15: Australian house price boom is over
Source: ABS, Economics@ANZ Australian house price boom is over Existing House Prices -5 0 5 10 15 20 25 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 % change year ending
Slide 16: House prices still buoyant in some states
Source: ABS Existing House Prices Although house prices are still buoyant in some states (but not Sydney!) -10 0 10 20 30 40 50 60 Sydney Melbourne Adelaide Canberra Perth Brisbane Darwin Hobart % change from end 2003
Slide 17: May rate rise will further depress dwelling construction
Sources: ABS and Reserve Bank Construction Approvals Housing Lending Rate The May rate rise will further depress dwelling construction activity Construction approvals and interest rates 4 6 8 10 12 14 16 18 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 8,000 9,000 10,000 11,000 12,000 13,000 14,00
Slide 18: Australian household debt has risen dramatically over the past decade
Australian household debt has risen dramatically over the past decade, taking ‘debt to income’ from around 80% in 1996 to over 160% From a position of being below international benchmarks, Australia now ranks higher than the other key English-speaking economies in terms of “debt to income” But much
Slide 19: Debt service ratios are more instructive indicators
Debt service ratios are more instructive indicators, although these too can be misleading and are sometimes leaned on excessively to argue that debt levels are too high and that some correction is inevitable The household debt service ratio has risen to a record high (11.1%). This does not imply hou
Slide 20: Decomposing Household Debt
Sources: Unpublished ABS HES data 1998/99 and 2003/04 surveys, Economics@ANZ O-54 years old million households Over 55 years old 1998/99 2003/04 Decomposing Household Debt Even though household debt doubled in the previous five years, in 2003/04, 67% of households still had little or no debt (i.e. d
Slide 21: Decomposing Household debt by volume
Sources: ABS HES 2003/04, Estimated by Economics@ANZ $bn 2003/04 1998/99 Decomposing Household debt In debt volume terms, the growth has been more evenly distributed (compared to number of households). But is still skewed towards the high DSR ranges. It is often assumed that households with high DSR
Slide 22: Business capacity utilisation remains well above long term average
Source: National Australia Bank Business capacity utilisation remains well above long term average Capacity Utilisation 74 76 78 80 82 84 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 % Long Term Average
Slide 23: Labour market is historically tight
Trend employment Source: ABS Unemployment rate Labour market is historically tight -10 -5 0 5 10 15 20 25 30 35 00 01 02 03 04 05 monthly change ('000) 4.5 5.0 5.5 6.0 6.5 7.0 7.5 00 01 02 03 04 05 %
Slide 24: Household spending has gained momentum in 2006
Retail Sales Values Source: ABS Household Consumption Volumes Household spending has gained momentum in 2006 0.0 0.2 0.4 0.6 0.8 1.0 1.2 01 02 03 04 05 % monthly change trend 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 01 02 03 04 05 % quarter change trend
Slide 25: Australia's trade position is slowly improving
Australia’s trade position is slowly improving Source: ABS 10 11 12 13 14 15 16 17 18 01 02 03 04 05 Exports Imports $bn, trend -2.5 -2.0 -1.5 -0.5 0.0 0.5 1.0 01 02 03 04 05 06 $bn, trend Exports and imports Trade deficit < font size="1" color="white" style="color:white;font-size:1.0pt;">-1.0
Slide 26: Resources exports rise, rural exports disappoint
Resources exports rise, although rural exports continue to disappoint *Including metals and non-monetary gold Source: ABS 0 1 2 3 4 5 6 7 8 9 95 96 97 98 99 00 01 02 03 04 05 06 $bn sa Rural Resources* Services Manufactures (excl metals) Other goods
Slide 27: Large difference between states
Sources: ABS, Economics @ ANZ Large difference between states – SE seaboard is lagging Real Gross State Product 0 1 2 3 4 5 6 7 8 NSW ACT SA VIC TAS QLD WA NT 2005-06 (f) 2006-07 (f) % pa
Slide 28: Contribution to state factor income by industry
13 7 2 12 5 3 AUST 13 4 2 2 0 0 ACT 8 3 2 8 20 3 NT 6 6 5 16 2 7 TAS 11 4 3 9 21 5 WA 10 6 3 16 2 6 SA 10 5 2 11 8 4 QLD 14 9 3 15 1 3 VIC 15 10 2 12 2 2 NSW Prop & Bus Services Finance & Insurance Electric Gas Water Manufacturing Mining Agriculture % Contribution to total state factor income (selec
Slide 29: Marked differences in population growth between states
Source: ABS Population Growth Marked differences in population growth between states -1 0 1 2 3 00 01 03 04 % yoy VIC QLD WA NT -1 0 1 2 3 00 01 03 04 % yoy ACT NSW SA TAS< /font>
Slide 30: Headline inflation at top of target band, core inflation rising
Headline inflation is already at top of target band and core inflation is rising Consumer price inflation Source: ABS Forecast 1.5 2.0 2.5 3.0 3.5 03 04 05 06 07 08 % change from year earlier Headline RBA Core RBA target band
Slide 31: Global cash rates
Source: Bloomberg Global cash rates RBA likely to lift rates one more time to 6%; Fed likely to lift rates to 5.50%. 0 2 4 6 8 97 98 99 00 01 02 03 04 05 06 % Australia USA UK Europe NZ Japan
Slide 32: Terms of Trade and A$
Sources: Reserve Bank of Australia, Australian Bureau of Statistics. Terms of Trade and A$ A$ has historically been driven by the terms of trade - relationship has become looser since end 1999 80 90 100 110 120 130 140 150 160 170 180 85 90 95 00 05 70 80 90 100 110 120 130 Index Terms of Trade (RHS
Slide 33: Commodity prices and the A$
Commodity prices and the A$ Sources: RBA, Reuters A$ heavily influenced by commodity prices and interest spreads Interest Spreads and the A$ 60 80 100 120 140 160 180 200 88 91 94 97 00 03 06 0.4 0.5 0.6 0.7 0.8 0.9 1.0 RBA index A$/US$ (RHS) RBA US$ commodity price index A$/US$ 0.45 0.50 0.55 0.60
Slide 34: Further declines in AUD to US$0.70 by end 2006 predicted
Sources: Bloomberg, Economics@ANZ Forecasts Further declines in AUD to US$0.70 by end 2006 predicted, but be wary of short term volatility 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 1991 1993 1995 2007 1999 2001 2003 2005 2007 AUD/USD Australian Dollar - Actual Australian Dollar - Model
Slide 35: New Zealand Economy
New Zealand Economy 35
Slide 36: New Zealand, not all doom and gloom
New Zealand, not all doom and gloom The New Zealand economy recovered from a temporary lull in the second half of 2005. Growth rebounded in Q1 2006, and partial indicators and anecdotes point to forward momentum being maintained into mid-year The economic prognosis remains for sombre growth. Financi
Slide 37: Recession averted, GDP growth of 1.5% forecast for FY06 & FY07
Recession has been averted, GDP growth of 1.5% forecast for FY06 & FY07 The recession has been averted, with the economy rebounding in Q1 2006 as expected after a flat H2 2005. GDP increased 0.7 percent in the March quarter, taking annual growth to 2.2 percent. Partial indicators and anecdotes point
Slide 38: Interest rates likely to ease in 2007
Interest Rates likely to ease in 2007 Inflation remains the dominant concern for the Reserve Bank. Higher petrol prices are adding to headline inflation pressure at a time capacity constraints remain, and inflation expectations are elevated. Inflation looks set to approach 4 percent The market has p
Slide 39: NZD weakening likely to continue in the short term
NZD weakening likely to continue in the short term The global backdrop is turning negative for the NZ dollar . Global interest rates are rising, eroding the yield advantage. Prospects for dampened liquidity are leading to a reassessment of risk Nonetheless, prospects for a lower NZ dollar from here
Slide 40: Credit growth outlook remains favourable
Credit growth outlook remains favourable Lending growth is easing although it remains near record highs . Housing, agriculture and business lending remain strong, up 15, 16 and 11 percent respectively on a year ago. An easing trend is nonetheless apparent with monthly gains in housing lending modera
Slide 41: Finance company distress, micro rather than macro
Finance Company distress, micro rather than macro 21 1,5281,262- other liabilities92,6272,411- other deposits255,9514,771- household deposits 20 10,106 8,444 Total Liabilities 761,653938- other assets135,2684,660- other loans132,9172,583- consumer loans2268263- housing loans 20 10,106 8,444 Total As
Slide 42: Credit Growth
Credit Growth ANZ 42
Slide 43: Private sector credit growth rebounds in early 2006
Private sector credit growth rebounds in early 2006 Annualised quarterly growth in total private sector credit peaked in late 2003 at 16.8% Led by a slowdown in household credit, annualised growth in total private sector credit fell to 11.7% in September 2005 However, a boom in business credit and a
Slide 44: Total private sector credit is expanding strongly
Source: RBA Total private sector credit Total private sector credit is expanding strongly… 6 8 10 12 14 16 18 00 01 02 03 04 05 06 annual % change annualised quarterly % change %
Slide 45: Boom in business lending
Source: RBA Business credit …driven by a (long awaited) boom in business lending… -5 0 5 10 15 20 25 00 01 02 03 04 05 06< /font> annual % change annualised quarterly % change %
Slide 46: Renewed strength in household borrowing
Source: RBA Household credit …and renewed strength in household borrowing 8 10 12 14 16 18 20 22 00 01 02 03 04 05 06 annual % change annualised quarterly % change %
Slide 47: Private sector credit growth has strengthened in recent months
Source: RBA Private sector credit Private sector credit growth has strengthened in recent months -2 2 6 10 14 18 26 00 01 02 03 04 05 06 annual % change household business total < font size="1" color="white" style="color:white;font-size:1.0pt;">22
Slide 48: Housing credit growth has passed its near term nadir
Sources: RBA, ABS, Economics@ANZ Housing credit Recent momentum suggests housing credit growth has passed its (near term) nadir… 10 12 14 16 18 20 22 99 00 01 02 03 04 05 06 -30 -20 -10 0 10 20 30 40 50 60 Credit (lhs) Finance approvals (6 months forward) (rhs) annual % change annual % change
Slide 49: Housing finance commitments continue to recover strongly
Source: ABS …and housing finance commitments continue to recover strongly Housing finance commitments 1 2 3 4 5 6 7 8 9 10 11 97 98 99 00 01 02 03 04 05 06 $ bn per month Owner-occupiers(excl. re-financing)Investors
Slide 50: Housing market fundamentals remain solid
Housing market balance: Australia Shortage (left) Underlying Requirement (right) Surplus (left) Completions (right) Housing market fundamentals remain solid, and the market is tightening Sources: ABS; Economics@ANZ ‘000 ‘000 -40 -20 0 20 40 60 94 96 98 00 02 04 06 40 60 80 100 120 140 160 180
Slide 51: Falling rental vacancy rates
Rental vacancy rate This tightening is reflected in falling rental vacancy rates Sources: ABS; Economics@ANZ; REIA 2.0 2.5 3.0 3.5 4.0 98 99 00 01 02 03 04 05 06 %; 4 qtr ma long run average
Slide 52: Business finance approvals have strengthened
Sources: RBA, ABS Business finance approvals have strengthened, but recent growth will be difficult to sustain Business credit and finance approvals 0 5 10 15 20 00 01 02 03 04 05 06 -30 -20 -10 0 10 20 30 40 50 annual % change credit finance approvals annual % change
Slide 53: Business credit growth strongest at the big end of town
Sources: RBA, ABS Business credit growth has been strongest at the ‘big end’ of town Business credit outstandings by loan size -5 0 5 10 15 20 25 04 05 annual % change <$100K$100K-$500K$500K-$2m>$2m
Slide 54: Personal credit has strengthened
Sources: RBA, ABS Personal credit has strengthened and new finance approvals have been strong Personal credit and finance approvals 5 10 15 20 00 01 02 03 04 05 06 07 -20 -10 0 10 20 30 annual % change Credit (lhs) Finance approvals (12 months forward) (rhs) annual % change
Slide 55: Private sector credit growth will remain robust
Private sector credit Solid momentum and a buoyant economic outlook suggest credit growth will remain robust Sources: ABS; Economics@ANZ; REIA 0 5 10 15 20 25 1997 1999 2001 2003 2005 2007 annual % change Business Total Housing Personal
Slide 56: Summary of forecasts – Australia
Summary of forecasts – Australia (bank year) 2005 20062007GDP 2.3 2.9 3.3 Inflation 3.0 3.1 2.5 Unemployment 5.0 5.1 5.2 Cash rate 5.5 5.75 6.00 10 year bonds 5.4 5.8 5.75 $A/$US 0.76 0.72 0.68 Credit 13.4 14.3 12.5 - Housing 13.3 13.6 13.8 - Business 13.7 16.4 11.2 - Other 12.8 10.1 10.1
Slide 57: Summary of forecasts – New Zealand
Summary of forecasts – New Zealand (bank year) 7.1 7.2 9.1 7.5 - Other 9.3 8.6 11.7 18.2 - Business 8.8 8.8 13.4 16.1 - Housing 8.9 8.6 12.8 15.2 Credit Growth 1.26 1.28 1.20 1.09 AUD/NZD 0.79 0.78 0.83 0.91 NZD/AUD 0.55 0.53 0.60 0.70 NZD/USD 6.3 6.1 6.3 5.7 10 year bond rate 5.7 6.1 7.4 7.1 90 day
Slide 58: The material in this presentation is general background information about the Bank’s activities current
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 and
Australia and New Zealand Banking Group — Corporate Update (August 2006) on 6ix