Westpac Banking Corporation · ASX:WBC
Westpac Banking — Investor Presentation (May 2005)
35 slides from Westpac Banking's investor presentation, May 2005
Slide 1: Australian Federal Interest Rates and Property Budget Report 2005/06
AUSTRALIAN FEDERAL INTEREST RATES BUDGET REPORT and PROPERTY 2005/06 Presented by Bill Evans Global Head of Economics May 2005
Slide 2: A run of budget surpluses
A run of budget surpluses 15 AUDbn AUDbn 15 underlying cash balance 10 10 5 5 0 0 -5 -5 -10 Budget night -10 MYEFO projection -15 -15 Source: Treasury, Westpac -20 -20 1980/81 1988/89 1996/97 2004/05
Slide 3: Decomposing the 2005/06 surplus position
Decomposing the 2005/06 surplus position $bn 18 Sources: Treasury, Westpac $10.2bn* 15 12 + – = $8.9bn 9 $5.8bn 6 $4.5bn 3 * Westpac estimate taking account of the differences between cash & accrual accounting 0 MYEFO Parameters Initiatives Budget night
Slide 4: New spending initiatives in the Budget
New spending initiatives in the Budget 4.0 $bn Source: Treasury, Westpac $3.6bn 3.0 2005/06 4 years $2.0bn 2.0 $1.5bn $1.3bn 1.0 $0.7bn 0.0 Border & Health Business International Welfare to work national security assistance engagement
Slide 5: Tax cuts: encourage participation & halt the brain drain
Tax cuts: encourage participation & halt the brain drain % current % from 1/7/05 from 1/7/06 0 0 to 6 0 0 to 6 1 to 6 17 6 to 21.6 15 6 to 21.6 6 to 21.6 4 years $21.7bn 30 21.6 to 58 30 21.6 to 63 21.6 to 70 2005/06 42 58 to 70 42 63 to 95 70 to 125 $3.1bn 47 70 plus 47 95 plus 125 plus Source: Tre
Slide 6: Interest rates and the Australian dollar - old and new forecasts
Interest rates and the Australian dollar - old and new forecasts May 2004 Last years Current Forecast forecast for (May avg) For May 06 May 2005 Cash (%pa) 5.25 5.50 5.50 5.50 US cash (%pa) 1.00 3.00 3.00 4.50 AUD/USD (US¢) 70.0 65.0 77.5 68.0 Source:Westpac
Slide 7: World growth: slowdown in 2006
World growth: slowdown in 2006 % % 6 6 Source: Westpac Economics, Consensus Forecasts 5 Consensus 5 actual Westpac 4 4 3 3 2 2 1999 2000 2001 2002 2003 2004 2005 2006
Slide 8: Contributions to growth in 2006
Contributions to growth in 2006 ppt ppt 1.2 1.2 Source: Westpac Economics, Consensus 1.0 Westpac 1.0 Consensus 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2 0.0 0.0 US Europe Japan East Asia China
Slide 9: US consumption running ahead of income
US consumption running ahead of income % ann avg % ann avg 8 8 *Smoothed real household consumption 6 real disposable income 6 4 4 2 2 Source: Factset, Westpac Economics 0 0 Mar-83 Mar-86 Mar-89 Mar-92 Mar-95 Mar-98 Mar-01 Mar-04
Slide 10: US house price growth explodes!
US house price growth explodes! % ann avg % ann avg 12 12 forecast Source: Factset, Westpac Economics 10 10 8 8 6 6 4 4 2 2 0 0 Mar-83 Mar-86 Mar-89 Mar-92 Mar-95 Mar-98 Mar-01 Mar-04 Mar-07
Slide 11: China's structure is sensitive to global demand
China’s structure is sensitive to global demand % of GDP 80 Source: CEIC, ABS, BEA 60 China USA Aust 40 20 0 Consumption Investment Exports
Slide 12: AUD model: base metals to lead AUD lower
AUD model: base metals to lead AUD lower USD USD 0.95 0.95 AUD/USD actual model (fit 0.837) 0.85 0.85 0.75 0.75 projected 0.65 0.65 0.55 0.55 Source: Westpac Economics 0.45 0.45 Dec-90 Dec-94 Dec-98 Dec-02 Dec-06
Slide 13: Base metal inventories and prices
Base metal inventories and prices 6mnth ann %* index -150 140 *inverted a wedge has opened -100 130 -50 120 0 110 50 100 100 90 150 80 200 70 250 change in Westpac's base metals inventories index (lhs) 60 Westpac base metals index (rhs) Source: Factset, Westpac Economics 300 50 Jan-90 Jan-92 Jan-94
Slide 14: AUD & the US Yield Curve – shape counts!
AUD & the US Yield Curve – shape counts! %yr bps 40 400 30 AUD/USD annual chg (lhs) forecasts 300 20 US yield curve (rhs) 10 200 0 -10 100 -20 0 -30 Source: Westpac Economics, RBA -40 -100 Nov-96 Nov-98 Nov-00 Nov-02 Nov-04 Nov-06
Slide 15: Household debt servicing ratio: well above trend
Household debt servicing ratio: well above trend – after rate hike and likely to rise % % 15 15 Source: ABS, RBA, Westpac 13 13 11 11 9 9 forecasts 7 7 5 5 Dec-82 Dec-86 Dec-90 Dec-94 Dec-98 Dec-02 Dec-06
Slide 16: Westpac-MI consumer sentiment: the bell rang
Westpac-MI consumer sentiment: the bell rang index index 130 130 120 120 110 110 100 100 90 90 80 80 Source: Westpac Economics, Melbourne Institute 70 70 Apr-93 Apr-95 Apr-97 Apr-99 Apr-01 Apr-03 Apr-05
Slide 17: Job growth to moderate with slower demand
Job growth to moderate with slower demand 4 % ann % ann 8 * matched sample forecast 6 3 4 2 2 1 0 employment * (lhs) Source: ABS, Westpac domestic demand (rhs, adv 2 qtrs) 0 -2 Sep-98 Sep-00 Sep-02 Sep-04 Sep-06
Slide 18: Prices and wages – trending down in 2006
Prices and wages – trending down in 2006 % ann % ann 9 9 average hourly wage rates 7 consumer prices 7 forecasts 5 5 3 RBA target band 3 1 1 Source: ABS, RBA, Westpac Economics -1 -1 Dec-87 Dec-91 Dec-95 Dec-99 Dec-03 Dec-07
Slide 19: RBA & Fed: differential to narrow markedly
RBA & Fed: differential to narrow markedly %pa %pa 8 8 forecast 6 6 4 4 US Australia 2 2 Source: Factset, Westpac 0 0 Dec-94 Dec-97 Dec-00 Dec-03 Dec-06
Slide 20: Australian interest rates – fixed rates are low
Australian interest rates – fixed rates are low % % 9 9 3 year bond yield cash rate 7 7 forecasts 5 5 Source: RBA, Factset, Westpac 3 3 Dec-95 Dec-97 Dec-99 Dec-01 Dec-03 Dec-05
Slide 21: Economic forecasts 2005/06 – looking ahead
Economic forecasts 2005/06 – looking ahead % change Government Westpac GDP 3 2.7 Domestic demand 3½ 3.0 Housing –2 –7.5 Exports 7 7.0 Unemployment rate 5 5.5 Source: Treasury, Westpac
Slide 22: Housing and consumer to cool demand
Housing and consumer to cool demand % chg % chg 30 12 Source: ABS, Westpac 25 20 2002 to 2004 2005 2006 8 15 10 4 5 0 0 -5 (lhs) (lhs) (rhs) (rhs) -10 -4 Dwellings Bus. Investment Consumption Domestic demand
Slide 23: House prices – the major states well off peaks
House prices – the major states well off peaks 40 % ann % ann 40 Source: ABS, Westpac Economics 30 30 Melbourne Sydney 20 20 10 10 0 0 -10 -10 Dec-89 Dec-92 Dec-95 Dec-98 Dec-01 Dec-04
Slide 24: House prices (% chg)
House prices (% chg) APM (a) Mar Year to qtr Mar qtr 2005 2005 Sydney -6.7 -8.8 Melbourne 2.5 3.8 Brisbane 0.7 3.3 Adelaide 2.6 10.5 Perth 5.3 14.2 Australia -1.3 -0.3 (a) Adjusted by the RBA for the average revision in the previous two years Sources: APM; CBA; RBA; Residex
Slide 25: Population growth
Population growth % ann % ann 4 4 NSW Qld Vic 3 3 2 2 1 1 Source: ABS, Westpac 0 0 Sep-84 Sep-89 Sep-94 Sep-99 Sep-04
Slide 26: Full-time jobs: Vic & NSW underperform
Full-time jobs: Vic & NSW underperform % ann 6 % ann 6 Source: ABS, Westpac 4 4 2 2 0 0 -2 -2 -4 -4 -6 NSW VIC rest of Australia -6 -8 -8 -10 -10 Mar-89 Mar-92 Mar-95 Mar-98 Mar-01 Mar-04
Slide 27: Real spending falls below income growth
Real spending falls below income growth % ann % ann 8 8 Source: ABS, Westpac House price upswing 6 6 4 4 2 2 0 0 Spending will slow relative to income over 2005 -2 disposable income -2 spending -4 -4 Dec-80 Dec-84 Dec-88 Dec-92 Dec-96 Dec-00 Dec-04
Slide 28: Housing equity withdrawal at an end
Housing equity withdrawal at an end % % 6 6 4 4 2 2 0 0 -2 -2 -4 Housing equity injection / withdrawal -4 % of disposable income -6 -6 Source: RBA, ABS, Westpac -8 -8 Dec-89 Dec-92 Dec-95 Dec-98 Dec-01 Dec-04
Slide 29: Retail sales outlook - moderation
Retail sales outlook - moderation % ann 24 % ann 24 20 total retail sales 20 forecast household good retailing 16 16 12 12 8 8 4 4 0 0 -4 -4 Source: ABS; Westpac -8 -8 1990 1993 1996 1999 2002 2005
Slide 30: Retail – days of brisk sales pass
Retail – days of brisk sales pass % chg % chg 2.0 2.0 trend, mth % chg 1.5 Australia Vic 1.5 1.0 1.0 0.5 0.5 0.0 0.0 -0.5 -0.5 Source: ABS, Westpac Economics -1.0 -1.0 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05
Slide 31: Dwelling approvals set to remain weak
Dwelling approvals set to remain weak 250 '000 '000 250 200 200 150 150 100 100 Source: ABS, Westpac Economics total annualised (rhs) 50 50 Mar-90 Mar-93 Mar-96 Mar-99 Mar-02 Mar-05
Slide 32: Dwelling approvals
Dwelling approvals '000 '000 5 5 4 4 3 3 2 2 1 1 NSW Vic Source: ABS, Westpac Economics 0 0 Mar-85 Mar-89 Mar-93 Mar-97 Mar-01 Mar-05
Slide 33: Export volumes growth to strengthen, but still below 90s
Export volumes growth to strengthen, but still below 90s 14 %ann %ann 14 12 '90s avg 12 10 forecasts 10 8 8 6 6 4 4 chain volumes, trend 2 2 0 0 -2 Source: ABS, Westpac Economics -2 -4 -4 Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05
Slide 34: Key economic forecasts (May 2006)
Key economic forecasts (May 2006) Current Budget 2005 forecast GDP * (%pa) 2.0 2.7 Cash (%pa) 5.50 5.50 US cash (%pa) 3.00 4.50 AUD 77.5 68.0 *Current is 2004/05 Source: Westpac Economics
Slide 35: Disclaimer
Disclaimer Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141. Information current as at date above. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this i