Down Under to Down Wonder – an Open Australia weathers the Global storm

Over the past few years the global economy has been a fascinating place….

Not so long ago things were looking pretty grim….

0

2

4

6

0

2

4

6

%

World GDPYear-average percentage change

%

Sources: IMF; Maddison database

20102002199419861978

IMF forecasts

1962 19701954

Trading partner growth had been hammered right across the board

0

20

40

60

80

0

20

40

60

80

Trading Partners with Well-below Trend Growth*Share of Australia’s trading partner GDP**

* More than 2 percentage points below rolling 10-year average growth,based on RBA forecasts

** Weighted using output shares at market exchange ratesSources: CEIC; RBA; Thomson Reuters

2009

%%

20021995198819811974

The world witnessed one of the most drastic collapses in trade in economic history

0

100

200

300

400

0

100

200

300

400

World Export ValuesJanuary 1994 = 100

Sources: CEIC; RBA; Thomson Reuters

2009

IndexIndex

200520011997

From an Australian point of view we’ve gone from down under to down wonder…….

The great escape - Australia’s economic performance was a stand out

-8.9

-7.5 -7.2

-6.1 -6.0 -5.9 -5.5 -5.5 -5.2-4.8

-4.2 -4.2-3.8 -3.8 -3.7 -3.5 -3.2

-2.8 -2.5 -2.2 -2.1 -2.0

-0.3

0.6

-10-9-8-7-6-5-4-3-2-101

-10-9-8-7-6-5-4-3-2-101

Finl

and

Taiw

an

Japa

n

Swed

en

Ital

y

Ger

man

y

Czec

h R

epub

lic

Uni

ted

King

dom

Net

herl

ands

Euro

Zon

e

Spai

n

Bel

gium

Uni

ted

Stat

es

Hon

g Ko

ng S

AR

Port

ugal

Sing

apor

e

Cana

da

Fran

ce

Nor

way

Kore

a

New

Zea

land

Swit

zerl

and

Gre

ece

Aus

tral

ia

Per CentPer Cent GDP growth of IMF advanced economies (through-the-year GDP growth - June 2009)

Especially in the labour market

Australia has performed well by OECD standards

The old labour market story in the north atlantic economies is not reflected in the evidence

0

2

4

6

8

10

0

2

4

6

8

10

Unemployment Rate

Sources: CEIC; Thomson Reuters

Euro area

%

US

201020082006200420022000

%

Higher-income Asian economies

The great trade reforms of the past 25 years gave us a good base to withstand the GFC

At times like these, there’s a lot of anxiety about trade issues and globalisation…..

Trade has been associated with higher living standards

Australia’s attitude towards Asia: ‘Once were worriers’ because of the ‘The Tyranny of Distance’

We are now in the right place at the right time: ‘The Tyranny of distance’ has been replaced by ‘The Power of Proximity’

Japan’s economic development has partially driven Australia’s export growth in the past

Now it will be China, India and ASEAN who will drive much of our export growth in the 21st century

China’s demand has helped to promote Australia’s prosperity……

Shanghai of the tiger: China is leading the charge in North Asia

With a little bit of help from my assigned translator

Sent airborne by Australia’s first female Prime Minister….

Doing it tough…with Kate Fischer and Pru Goward

To stimulate or not to stimulate: some fiscal packages have been effective - ‘bamboo shoots’ as much as ‘green shoots’

China – Industrial Production2005=100

60

80

100

120

140

160

180

60

80

100

120

140

160

180

2009

Index

200820072006

Steel

Index

Power generated

Automobiles

2004 2005Source: CEIC

Looking west, there’s room to grow income-wise

GuizhouGansu

YunnanTibetAnhui

JiangxiGuangxiSichuanHainan

QinghaiHunan

NingxiaChongqing

ShaanxiHenanHubei

XinjiangShanxi

HeilongjiangHebei

JilinFujian

LiaoningInner Mongolia

ShandongGuangdong

JiangsuZhejiang

TianjinBeijing

Shanghai

0 50 100 150 200 250 300

China – Regional Income LevelsPer cent of nationwide average in 2008

Source: CEIC

% Eastern Central Western

Exporter confidence in China remained high during the GFC

Even in terms of SMEs China is a chart buster

34%

29%

26%

20%

13%

11%

10%

9%

8%

8%

7%

New Zealand

United States

United Kingdom

Net ASEAN

China

Hong Kong

South Africa

Japan

Malaysia

Phillipines

Singapore

Where the bolly hell are you?

India has shot up like a 2020 game

0

2

4

6

0

2

4

6

Australian Exports to IndiaShare of total, current prices

Source: ABS

Share of merchandise exports

% %

Share of services exports

04/05 08/0900/0196/9792/93

Gilly is going into bat for the ‘Gong

Australia’s financial institutions have remained robust

10

100

1000

10000

10

100

1000

10000

AAA AA AA- A+ A A-

Australia's four largest bank holding companies

Total assets, $US billion, log scale Total assets, $US billion, log scale

Credit ratings of the largest 100 banking groups

Given the GFC and the ‘recession porn’ faced our exporters have been a global surprise package

-40

-30

-20

-10

0

-40

-30

-20

-10

0

Export Volumes Growth*Nine months to June quarter 2009

% %

* Includes June quarter estimates where data are not available** Merchandise onlySources: ABS; Bundesbank; CEIC; National Statistics Office; RBA;Thomson Reuters

A quiet revolution - Australia has built a strong ‘heartland’ of true blue exporters

Non-Exporters ‘Domestic Businesses’

Exporters/ Non-Exporters ‘Opportunistic/ Irregular’

Exporters ‘Heartland’

3333

Short-term prospects: (3 months) Negative export growth but increasingMedium-term prospects: (12 months) Positive export growth and accelerating

Australian exporters kept their nerve

NB: Don’t know responses have been excluded from the analysis

Change in export orders

Net Change

15% (actual)

- 10% (actual)

+ 10% (expected)

+ 40% (expected)

34

Australian exporters were positive about employment

More than half of the exporters (59%) are optimistic regarding their profitability over the next 12 months expecting it to increase.

Almost half of the exporters (47%) are planning to keep the staff numbers the same while 45% of exporters are likely to increase their staff head count.

Wage increases are likely in over two thirds of the exporters (69%).

More than half of the exporters (59%) are optimistic regarding their profitability over the next 12 months expecting it to increase.

Almost half of the exporters (47%) are planning to keep the staff numbers the same while 45% of exporters are likely to increase their staff head count.

Wage increases are likely in over two thirds of the exporters (69%).

Australian exporters and workers were flexible in terms of hours

33.6

33.8

34.0

34.2

34.4

34.6

34.8

33.6

33.8

34.0

34.2

34.4

34.6

34.8

Average Hours WorkedMid-month of quarter

Source: ABS

2009

Hrs

200820072006200520042003

Hrs

Now our trading partner growth has bounced back

East Asia has been an important part of that story

The emerging economies are really geeing up the G7

There’s plenty of action for Australian exporters in the emerging world (source: UBS)

30

40

50

60

70

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Advanced

Developing

% share of goods exports

Developing ex China

Easy rider: Steppe-ing out in Mongolia

Australia’s strength in Asia is a good story for northern hemisphere investors

A good airport economist knows that Australian exports are well diversified

Taking a walk on the supply side

There are now new challenges that require skillful economic management

Demography is destiny?

l l l 0

20

40

l l l0

600

50

100

600

Population

Source: United Nations

mChina Japan

KoreaIndiamm

m

2045

Total

Workingage

1 200

1 200

2020199519702045202019951970

Japan: Land of the greying sun?

China: getting old before they get rich?

India: Poppadom preach?

Many experienced exporters have survived crises before

4%

21%

17%20%

37%

up to 5 years 5 to 9 years 10 to 14 years 15 to 19 years 20+ years

SOURCE: Sensis® Business Index

Despite some Gen X and Gen Y growth, global SMEs are mainly run by baby- boomers

13%

20%

39%

27%

1%

up to 30 years 31 to 40 years 41 to 50 years 51 to 60 years 60+ years

The GFC shook most of the world….

In Australia we’ve been successful as we’ve married an open economy to successful social reform

One big happy free trade agreement……

Down Under to Down Wonder – an Open Australia weathers the Global storm