BT Monthly Markets Chart Pack – November 2008

1. BT Monthly Markets Chart Pack – November 2008 An overview of movements in global financial markets

2. Markets continued to fall in November … • Global share markets continued their slide in November amid weakening economic data and the realisation that several of the world’s major economies had slipped into recession. In the US, the benchmark S&P 500 Index fell 7.5%, while bourses in Europe (-6.2%), the UK (-2.0%) and Japan (-0.8%) were also lower. • The Australian share market fell for the third month in a row in November, with the S&P/ASX 200 Accumulation Index closing down 6.2%. Again, the fall came mostly on the back of a weak lead from the US and falling commodity prices. • So far this year, the Australian share market is down 38.3%, compared to a gain of 16.1% in 2007.

3. …but the long-term trend is still positive, despite some major market events Impact of major market events on global shares since 1986 Jul 01 Tech Wreck Jun 07 US Sub-prime Crisis Sep 01 Attack on Twin Towers Jul 98 Russian Bond Crisis Aug 97 Asian Currency Crisis Nov 89 Fall of the Berlin Wall Feb 94 Bond Market Crash Mar 03 Troops enter Iraq Oct 87 Wall Street crash Jan 91 Gulf War Global shares measured by the MSCI World ex-Australia (net dividends) Index in A$. Source: BT Financial Group, MSCI

4. Key Australian economic news – November • The Reserve Bank of Australia (RBA) cut interest rates by a further 1.00% (to 4.25%) at its early December meeting. The RBA has now cut the official cash rate by 3.00% since September last year. • The unemployment rate remained steady at 4.3% in October, with the economy adding 34,300 new jobs during the month. The market had anticipated a loss of 10,000 jobs, so the outcome was much better than expected. • The Westpac/Melbourne Institute’s consumer sentiment survey recorded a jump of 4.3% in November. The improvement in the month coincided with a further sharp reduction in the RBA cash rate (-0.75%) at the beginning of November. • Retail sales were up just 0.1% in the September quarter to be 1.0% higher over the year. Source: BT Financial Group

5. The Australian dollar falls further in November • The Australian dollar (A$) fell again against the US dollar (US$) in November, though not by nearly as much as last month. The local currency lost 1.9% to close at US$0.6549 cents thanks largely to weaker commodity prices and a gloomy economic outlook. It’s likely now that we’ll see the A$ trade around current levels as we head into 2009, particularly if commodity prices remain under pressure. • At the end of November: A$1 bought US$0.6549 -1.9% €0.5162 -1.6% ¥62.51 -4.9% Source: BT Financial Group

6. The Australian dollar versus the US dollar… Currency markets – A$ per US dollar Source: BT Financial Group. Figures at 30 November 2008.

7. the Euro… Currency markets – A$ per Euro Source: BT Financial Group. Figures at 30 November 2008.

8. and the Yen Currency markets – A$ per Yen Source: BT Financial Group. Figures at 30 November 2008.

9. Official world interest rate movements – November • In Australia, the Reserve Bank cut the official cash rate a further 1.00% (to 4.25%) at its early December meeting. Elsewhere, the European Central Bank, the Bank of England and the Bank of Japan (late October) also cut their benchmark interest rates. The US Federal Reserve didn’t meet in November. Source: BT Financial Group

10. Global share market returns 30 November 2008 Source: BT Financial Group

11. Short-term asset class performance 1-year rolling returns to 30 November 2008 (%) Best performing asset class for the year Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Barclays Capital Global Aggregate Bond Index hedged to $A

12. Short-term asset class performance (cont’d) 1-year returns to 30 November 2008 (%) 30 November 2007 30 November 2008 Australian bonds Listed property Australian shares Global bonds Global shares Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Barclays Capital Global Aggregate Bond Index hedged to $A

13. Long-term asset class performance 30 November 2008 Australian shares Listed property Australian bonds Global shares Cash Note: Accumulated returns based on $1,000 invested in December 1984 Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index

14. Oil prices fell again as demand dried up and the global economy slowed Oil prices – US$ per barrel Source: BT Financial Group. West Texas Intermediate oil price at 30 November 2008.

15. Summary • The Australian economy has held up pretty well compared to some of its global counterparts in 2008, though we are now seeing evidence that the global economic slowdown is having a real and negative effect locally. • The RBA’s decision to lower the official cash rate again in December highlights the Bank’s concern over the direction of the Australian economy and we expect another rate cut when meetings resume in February next year. • With commodity prices likely to remain under pressure in the near-term and the RBA likely to cut interest rates again in early 2009, we think the Australian dollar will continue to trade around current levels into next year. • Gains in global share markets, including here in Australia, are likely to remain under pressure in the near-term, particularly as global growth continues to slow down.

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