1. Craig James Chief Economist, CommSec, July 2011 The Australian & Global Economy ediscoveryconsulting.blogspot.com

2. Important information This presentation has been prepared without taking account of the objectives, financial situation or needs of any particular individual. Before acting on the information in this seminar, you should consider its appropriateness to your circumstances and, if necessary, seek appropriate professional advice. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124 and a Participant of the ASX Group. Examples used in this presentation are for illustrative purposes only.

4. The Big Picture  Global economy growing… Emerging nations lead the way…

5. Global economy So What? Exchange rates, trade, sharemarket, interest rates Drivers of world economy - Contribution to growth 2011 China0.81% United States0.74% India0.18% Japan0.14% Newly Industrialised Asia*0.13% Germany0.13% ASEAN 5 #0.12% Brazil0.11% Russia0.10% United Kingdom0.08% France0.07% Canada0.05% Other countries1.70% World4.30% Source: IMF & CommSec * Newly industrialised Asia – Hong Kong, Taiwan, Singapore and South Korea # ASEAN 5 – Indonesia, Malaysia, Thailand, Philippines and Vietnam

6. Ascent of China

7. China awakes  Land of 1.3 billion people industrialises… Major resource demands… www.thenewmans.id.au

8. Australian focus is trade  Three-quarters of exports to Asia… But driven by China and India…

9. China industrialises  China is our number 1 trading partner… Huge gains, potential to grow further…

10. Demand for Aussie Raw Materials

11. Commodity price perspectives  Commodity prices hit 100-year low in 2002…. and then came China…Australia is a key winner

12. Mining boom

13. Not just mining So What? Interest rates, investment, economic policy Drivers of the Australian economy 2007 – 2010, % contribution to the change in GDP Mining17.4% Professional, scientific and technical services11.9% Construction11.6% Financial and insurance services10.8% Agriculture, forestry and fishing10.8% Healthcare and social assistance9.7% Education and training5.1% Public administration and safety5.1% Transport, postal and warehousing3.8% Wholesale trade3.5% Source: ABS & CommSec

14. Big Picture  Economy slides due to floods …but underlying position is soft…

15. Conservative Consumers  Consumers remain cautious… …and more inclined to save

17. Housing  Building approvals flat… …and house prices fall for four months

18. Tight job market  Unemployment remains low… …wages up, especially in the mining sector

19. Interest rates  Cash rate still below average… …but what matters are lending rates…

20. Inflation  Headline inflation boosted by petrol, fruit & veg… …but underlying rate held down by discounting

21. Reserve Bank views  Underlying inflation contained… …but RBA expects stronger growth ahead

22. Aussie dollar  High Aussie dollar keeping inflation down… …as well as keeping a cap on growth…

23. Outlook & Issues  European debt  US economic recovery  China expansion  Carbon tax  Mining Tax  Structural change  ‘New conservatism’

24. CommSec forecasts Forecasts Economic growth2.40% in 2010/114.10% in 2011/12 Inflation3.10% in 2010/113.10% in 2011/12 Unemployment4.50-4.75%, end 20114.25-4.50%, end 2012 Cash rate5.00-5.25%, end 20115.50-5.75%, end 2012 Sharemarket (Australian) 5,000 points, end 20115,500 points, end 2012 Australian dollarUS104c in Dec 2011US95c in December 2012

25. www.despair.com