Westpac Federal Budget Dinner May 9th - Bill Evans

Went to the Westpac Federal Budget Dinner last night at Crown. It did have Melb/Vic bias because of the audience. Here are my scribbles based on Bill Evans commentary. I have also attached the presentation/slides for eveyone's consumption. Happy reading!

• The turnaround in the Federal budget as a % of GDP is the largest in over 40 years
• Our net public debt is one of the smallest in the developed world
• Despite the large contraction in public finances over the next FY (over 3%), the impact of these changes on GDP is much smaller, Bill anticipates this to be around 1% contraction on GDP
• Net savings initiatives under 'Other' are a sum total of 50 initiatives
• Biggest spending initiatives under roads, is mostly for NSW ($3b) for the Pacific Highway mostly, and one large project in SA. Nothing for Victoria.
• Families related to the education bonus
• 2012/2103 is the forecast to be the largest reduction in government payments for over 30 years. This is optimistic based on demonstrated performance by the Federal government over the past 30 years
• Last interest rate cut will bolster confidence but seemed to have bottomed at the end of 2011
• Mining investment the biggest contribution to private demand, with consumer less so as a result of housing contracting
• Mining boom will continue to drive higher imports but overall exports will fall due to global demand, and will we start seeing large trade deficits again
• Retail sales off their worst but Victoria hardest hit, with manufacturing taking a hit through high AUD and very little mining investment
• One of the key areas which will retard growth will be the high household debt in conjunction with global uncertainty & increasing unemployment
• Housing prices in Melbourne were the biggest beneficiary of the post GFC stimulus, but the is now experiencing the biggest hangover. Worst seemed to be at the end of 2011, and slight increase in early 2012, but tracking sideways throughout 2012, with a better 2013.
• Housing price growth expectations starting to turnaround for the first time in a year - a leading indicator that shows some slight rebound in outlook
• Housing affordability is back to 2003/4 levels, but Melbourne still slightly less affordable than the national level. Reduced interest rates will assist affordability+
• Construction levels close to GFC levels but is expected to increase off these low levels. Still well below underlying demand
• Dwelling approvals for Melbourne were the biggest beneficiary of post GFC stimulus but significant reduction in the last 12 months
• Melbourne taxes on new housing around 38% and one of the biggest impacts on unaffordability. Sydney is worse at 44%
• Consumer sentiment re finances have deteriorated primarily due to the lack of interest rate reductions from the RBA & independent bank interest rate rises
• Unemployment to go a touch higher in 2013 to 5.5% before recovering. Vic is suffering and is biggest need of stimulus/interest rate reductions
• Whilst cash rate is expected to go to 3 - 3.25%, 3 year fixed rates are expected to increase over the year. i.e. lock in to a fixed mortgage rate now, unless cash rate is forced below 3 then you would expect to see lower fixed rates
• Neutral cash rate in today's environment is 4.1%
• RBA focus is primarily on inflation, and a falling AUD will place pressure on tradeables price inflation and would put upward pressure on inflation
• Government bonds (to fund our recent deficits) have been purchased primarily by Asia because of confidence in Australian economy, which has contributed in keeping the AUD high.
• China will now reverse contractionary policy as housing prices have reverted back to their 2009 levels and inflation fears have subsided
• China RMB to be floated in between 5-10 years.
• Ongoing European worries for the next 2 years. Expects EURO to be disbanded in 2014
• Spain the biggest issue in Europe and would expect to leave the EURO
• US economy the hardest to read, but is expecting QE3 if poor jobs data continues to come through
• If QE3 comes about, get on board US equities
• Expects strong rebound in ASX in late 2012 and 2013
• Thinks commercial property at 8% (office) 7% (industrial) is an excellent investment choice vis a vis 10 yr bond return


Some questions from the floor were answered as follows;
• re surplus debate, the Federal government should be looking at larger stimulus for infrastructure and relieve states of most of the funding, so they can ease their reliance on property taxes and increase affordability
• Low public debt allows more than enough margin to invest & go into debt
• Carbon Tax effect will not be as large as its detractors believe, but electricity prices will continue to increase due to demand pressures and investment in additional capacity needs to be paid
 

Attachments

  • Budget_Master VIC_2012.pdf
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sounds sensible. This obsession with a surplus for the sake of a surplus is hurting everyone

So, Ausprop, you completely disagree with Joe Hockey that the budget surplus should have been somewhere in the orders of magnitude larger?
 
So, Ausprop, you completely disagree with Joe Hockey that the budget surplus should have been somewhere in the orders of magnitude larger?

there is a difference between what something should have been if you do something vs. what is a desired target.
 
Ausprop, nothing you say ever makes any sense to me.

BLY, an excellent report. Thank you. That graph on p.54 showing the correlation between QE and S&P500 movements is quite astonishing, remembering it's meant to show something of a capitalist society. Great news on China growth in there. Most pleasing is long term lower interest rates forecasted.
 
And what in name of God is that meant to mean?

3rd and final attempt, by way of illustration.

- you say you are going to build a boat and it will take you a day
- i say it should take you half a day
- you say 'i knew it, you want a boat as much as I do'
- i say no, the last thing I want is a boat but if I were to build one it would take me half a day
 
Hi Buzz,

How would people get invited to this type of events?

How can I find out information about these when they are coming?

Thanks :)
 
3rd and final attempt, by way of illustration.

- you say you are going to build a boat and it will take you a day
- i say it should take you half a day
- you say 'i knew it, you want a boat as much as I do'
- i say no, the last thing I want is a boat but if I were to build one it would take me half a day

You must think Joe Hockey is one seriously tortured individual.
 
Hi Buzz,

How would people get invited to this type of events?

How can I find out information about these when they are coming?

Thanks :)

I was invited through Westpac's Premium Financial Services (PFS) team in Melbourne. The banks various customer facing departments are allocated tables and they then invite key customers or new-to-bank targets.

I got a gig because others pulled out.
 
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You must think Joe Hockey is one seriously tortured individual.

From what I can see Labor has fallen into Liberal's trap of the surplus obsession. It's obvious even to Blind Freddy that this Labor government is incapable of delivering anything on target, let alone a budget surplus (See forecast $20bn deficit to expected $44bn deficit in 2011-12).

If and when the budget forecast is updated near the election next year it will show that Swan will deliver yet another budget deficit, essentially breaking his promise and giving the Coalition more ammunition to show how dysfunctional this government really is. Swan's goose is, metaphorically speaking, cooked, and there's nothing that Labor apologists like Belbo et al can do about it.
 
A lot of the commentaries I've read essentially say the budget has cooked to books, taking away from the current year and the 2013 year, to create a surplus for the 2012 year.

I had to laugh at what I received in the mail today. My local (labour) member stating how good the budget would be for small business because they were reducing the company tax rate. Of course this didn't eventuate in the actual budget.

The letter also included information about how some items would be able to depreciated in a single year, rather than over 5 years. It had several different Dell laptops as examples. I wonder who sponsored this mailout?
 
From what I can see Labor has fallen into Liberal's trap of the surplus obsession. It's obvious even to Blind Freddy that this Labor government is incapable of delivering anything on target, let alone a budget surplus (See forecast $20bn deficit to expected $44bn deficit in 2011-12).

If and when the budget forecast is updated near the election next year it will show that Swan will deliver yet another budget deficit, essentially breaking his promise and giving the Coalition more ammunition to show how dysfunctional this government really is. Swan's goose is, metaphorically speaking, cooked, and there's nothing that Labor apologists like Belbo et al can do about it.

Well, there's your culprit, Ausprop. It was a Liberal trap all along. Aaron will explain how it all went down. Somehow or other. :cool:

I just feel for poor ol' Joe Hockey though. I mean, you know he's not the sharpest tack in the box, but the contortions of logic being piled up for him to pull off every time a senior Liberal opens their mouth is getting cruel.

And have you seen that Abbott's sole strategy for his budget in reply speech tonight (according to speaking notes seen by the media) is to simply lie? Yep. The line will be that voters are out of pocket on the carbon tax - despite Treasury data showing that they are in fact very far ahead.

Coalition speaking notes rely on voter mistrust and disillusionment with Labor and uncertainty about the economy in general and the impact of the carbon tax in particular, to sweep aside [Treasury] calculations.
Read more: http://www.smh.com.au/opinion/polit...or-handouts-20120510-1ye6g.html#ixzz1uRaOaTKV

P.S. Aaron: I'm an Abbott cynic, not a Labor apologist. You know, like Costello.
 
Well, there's your culprit, Ausprop. It was a Liberal trap all along. Aaron will explain how it all went down. Somehow or other. :cool:

I just feel for poor ol' Joe Hockey though. I mean, you know he's not the sharpest tack in the box, but the contortions of logic being piled up for him to pull off every time a senior Liberal opens their mouth is getting cruel.

And have you seen that Abbott's sole strategy for his budget in reply speech tonight (according to speaking notes seen by the media) is to simply lie? Yep. The line will be that voters are out of pocket on the carbon tax - despite Treasury data showing that they are in fact very far ahead.


Read more: http://www.smh.com.au/opinion/polit...or-handouts-20120510-1ye6g.html#ixzz1uRaOaTKV

P.S. Aaron: I'm an Abbott cynic, not a Labor apologist. You know, like Costello.

Hi Tex

Read the article, either you,

have no comprehension as to what the article says,

you are being deliberately misleading

or..... nah, no one could be that stupid.
 
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