A Global Economic and Market Outlook November 2012 Presented by Dr Chris Caton

Euro-area government bond spreads (to German bonds) 2

The two that matter have clearly improved (long-term bond yields (%)) 3

Growth Forecasts (%) Month of Forecast J-12F-12M-12A-12M-12J-12 A-12S-12O-12 Australia New Zealand US Japan China Germany UK “World” Source: Consensus Economics

Growth Forecasts (%) Month of Forecast J-12F-12M-12A-12M-12J-12 A-12S-12O-12 Australia New Zealand US Japan China Germany UK “World” Source: Consensus Economics

6 Financial Market Forecasts Now (14 Nov) End-Dec 2012 End-June 2013 AUD/USD Official cash rate (%) Year Bond yield (%) ASX

7 The Australian Dollar and US Trade Weighted Index Source: Datastream IndexAUD/USD US TWI inverted (LHS) AUD/USD (RHS)

8 Australian dollar against Asian share markets Source: Datastream $AAsian Emerging Markets Index Asian Emerging Markets Index (RHS) $A (LHS)

9 Australian Sharemarket Performance – ASX200 Source: Bloomberg

The Australian market is still a little cheap (p/e ratio) 10

P/Es by sector 11

World share markets are cheap (P/E ratio) 12

13 Real GDP growth in Australia and the US Source: Datastream Year to % change

It’s the developing world, stupid 14

Australia’s Terms of trade (Index to = 100) Source: ABS Catalogue Number , RBA and Treasury Index Budget forecasts/ projections 5-year centred moving average

Chinese steel and iron ore spot prices 16

17 Employment growth has been slow Source: ABS 000’s% Employment (LHS) Unemployment Rate (RHS)

Contributions to jobs growth (year to August 2012, thousands) 18

19 Australian Inflation Source: ABS % BT Forecasts GST Effect

Interest rate changes do make a difference! 20

House Prices - Australia v Sydney Source: ABS Index (1987 = 100)

We are very expensive compared with the United States  22

But not otherwise! 23

Prices have fallen everywhere but they may be turning 24

25 Gross Domestic Product Source: ABS % BT Forecasts GST Effect

26 Mining investment will peak soon

27 Source: Consensus Economics GDPInflation Australia Norway New Zealand United States Sweden Canada United Kingdom Netherlands Switzerland Spain France Germany Eurozone Japan Italy Global Medium-Term Economic Growth and Inflation Prospects ( )

28 Asia-Pacific Medium-Term Economic Growth and Inflation Prospects ( ) GDPConsumer Prices India China Indonesia Philippines Malaysia Thailand Singapore Taiwan South Korea Hong Kong Australia New Zealand Japan Source: Consensus Economics

29 Morgan Stanley Capital Indexes Source: Datastream Developed IndexAsian Emerging Markets Index Asian Emerging Markets Index (RHS) World Developed Index (LHS)

30 Summary  Eurozone debt is a serious issue; it will drag on for a long time but is unlikely to end in catastrophe. We will always worry about China.  The Australian economy should continue to experience moderate but unbalanced growth, led by mining investment. The mining boom will, of course, end eventually.  The cash rate is likely to fall again.  The exchange rate is above fair value. The rest of the world is still on sale for Australians.  Share markets are cheap.

31 This presentation has been prepared by BT Financial Group Limited (ABN ) ‘BT’ and is for general information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The presentation has been prepared without taking into account any personal objectives, financial situation or needs. It does not contain and is not to be taken as containing any securities advice or securities recommendation. Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice. BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation. Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee. It is important to note that past performance is not a reliable indicator of future performance. This document was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author. For more information, please call BT Customer Relations on :00am to 6:30pm (Sydney time)