Download Quarterly Economic Outlook – March 2017

Quarterly Economic
Outlook
Global and Australian Forecasts
KPMG Economics
—
March 2017
Contents
Executive summary
3
Global outlook
5
Global forecasts
11
Australian outlook
13
Australian forecasts
22
KPMG Economics contacts
24
Executive summary
Global economy
Australian economy
•
The world economy slowed in 2016 to record the lowest rate of economic growth since 2009.
•
Geopolitical uncertainty remains high, with concerns about political leanings towards ‘closing borders’ and increased
protectionism.
•
Inflationary expectations have been re-rated over the past few months, with previous concerns about the emergence of
global deflation now abated.
•
The US has seen increased employment, leading to wages growth and a closing in the output gap. The FoMC
increased the FFR by 25 bp, and the ‘dot plot’ contained in the latest minutes shows members expect three more 25
bp rises in each of 2018 and 2019.
•
Long run interest rates are rising across the globe, with 10 year yields increasing 90 bp in Australia, 60 bp in the Euro
Area, Canada, and China, and 50 bp in the US since October 2016.
•
Oil prices have risen by US$7/bbl since October 2016 to now be around US$55/bbl.
•
India has experienced a significant self-inflicted economic disruption due to currency demonetisation reforms.
•
There is a growing level of frustration in business and the wider community with the political economy in Australia, with
all sides of politics seemingly focused more on short term ‘gotchas’ than implementing growth enhancing policy.
•
The Australian economy experienced mixed outcomes in the second half of 2016, achieving growth of -0.5% in
2016Q3, but then bouncing back with strong growth of 1.1% in 2016Q4. This growth was underpinned by higher
household consumption activity, strong growth in exports, and a significant uplift in public sector capital expenditure.
•
The winter crop has achieved a ‘bumper’ harvest, up nearly 50% over 2015 levels.
•
LNG exports are forecast to increase from about 37MT in FY16 to 54 MT in FY17 and then to 67MT in FY18,
generating an additional $20 billion in export revenues.
•
Australia’s Terms of Trade has lifted 9.1% over the December quarter, and 15.6% since the beginning of 2016.
Australian forecasts
© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
3
Global
outlook
Global outlook
Marcus Aurelius, one of Machiavelli’s five good emperors, would have said of 2016,
Chart 1
Global Economic Policy Uncertainty Index
“Annus inferius mediocris oeconomia1”.
350
In the year to December 2016 the world economy grew at its slowest annual rate since 2009,
hindered by geopolitical uncertainty and concerns about political leanings towards ‘closing borders’
and increasing protectionism.
250
Index Number
The main global event since the publication of our November 2016 edition of KPMG Economics
Quarterly Economic Outlook has been the inauguration of Donald Trump as the 45th President of
the United States of America. After some volatility the reaction of global financial markets to the
Trump victory was generally positive, with bond yields increasing, the USD appreciating and stock
market values rising. This reaction probably reflects expectations of expansionary fiscal policies,
including tax cuts for individuals and businesses, additional spending in infrastructure assets, and
deregulation of various government controls.
300
50
0
Source: KPMG Economics, Davis, www.policyuncertainty.com
Chart 2
World GDP Growth
10%
8%
6%
Annual % change
The United Kingdom is still experiencing very subdued growth on the back of insecurity of
households and business. Annual growth for 2016 is expected to be about 2% following growth of
0.6% in the final quarter. This relatively better growth for the quarter was achieved through higher
consumption activity, although this is likely to be short lived as real incomes are expected to fall
over the coming months due to the inflationary effects of currency depreciation. The
unemployment rate is also expected to rise to mid-5%’s during 2017 on the back of a slowing
economy; with this slack in the labour market also holding down real wage growth.
150
100
The other key change that has occurred over the last few months has been the re-rating of
inflationary expectations, with previous concerns regarding the emergence of deflation now abated;
although inflation remains well below central bank targets in Europe and Japan.
From a key markets perspective the end of 2016 has shown increasing employment within the US,
leading to wages growth and a contraction in the output gap. Along with the responses of the
financial markets, various economists have suggested that some of the policies being advocated
by President Trump will be growth enhancing, at least in the short run. Such a situation is likely to
enable the US Federal Reserve to bring monetary policy back to ‘normal’ settings within a shorter
period of time.
200
4%
2%
0%
-2%
-4%
1. Translates to ‘year below the average economy’
-6%
Emerging Markets and developing Economies
Advanced Economies
World
Source: KPMG Economics, IMF
© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
5
Global outlook
In contrast, the December 2016 meeting of the European Central Bank saw the extension of Asset
Purchase Program until the end of 2017, which was previously set to finish in March this year;
although the monthly program spend will fall from €80 billion to €60 billion.
Since October 2016 various Central Banks have adjusted their benchmark interest rates, with
reductions in Argentina, Iceland and New Zealand; while Mexico’s and Turkey’s benchmark rates
have risen due to increased currency pressures. Consistent with bond yield movements, Brazil’s
benchmark interest rates fell 100 bp over two steps (November 2016 and January 2017) to be
13.0%.
Oil prices have risen by about US$7/bbl since October 2016 to now be around $55/bbl. While still
about half the price achieved during 2011 to 2013, current oil prices are also more than double the
market low price in February 2016 of US$26/bbl. The driver of this price increase has been the
adoption of supply constraint agreements by:
• OPEC members, which are due to reduce output by 1.2 million b/d for 6 months from
January 2017; and
• non-OPEC members, including Russia and Mexico, to decrease their output by 0.6 million
b/d in parallel with the OPEC countries.
6%
% difference between Actual and Potential GDP
Throughout most of 2016 the direction of monetary policy has been finely balanced with much
focus on the ‘when-will-they’ deliberations of the FoMC of the US Federal Reserve. Finally, in the
last FoMC meeting on 14 December 2016 the US Fed raised its target rate range for the Federal
Funds Rate by 25 bp from 0.50% to 0.75%. The latest ‘dot plot’ indicates three additional 25 bp
increase are expected during 2017, with a further three 25 bp increases in each of 2018 and 2019
in response to stronger economic activity in the US.
Chart 3
Output Gap by Country
4%
2%
0%
-2%
-4%
-6%
-8%
US
Japan
Germany
UK
Australia
Source: KPMG Economics, The Conference Board
Chart 4
Total Factor Productivity by Country
5%
4%
3%
Annual % change
As mentioned previously, since the election of President Trump, long run interest rates in the US
has been progressively rising. This phenomenon has also been occurring in other jurisdictions,
with 10 year sovereign yields rising by about 90 bp in Australia, 60 bp in the Euro area, Canada
and China, 30 bp in Germany and 15 bp in India between the beginning of October 2016 and 23
February 2017. However, not every jurisdiction has experienced rising bond yields; Brazil’s 10-year
bond rates have fallen by 110 bp, yields on Russian Government bonds rose since October 2016,
but they have since retreated to be flat at the end of February 2017.
2%
1%
0%
-1%
-2%
-3%
There have also been significant price increases in other commodities on global markets,
particularly metals.
-4%
-5%
US
Japan
Germany
UK
Australia
Source: KPMG Economics, The Conference Board
© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
6
Global outlook
Chart 5
Official Interest Rates
8.0
7.0
6.0
5.0
4.0
%
The United States experienced strong economic growth during the second half of 2016, following a
relatively weak performance during the previous three quarters. During 2016Q3 output grew at an
annualized rate of 3.5% per annum, with exports, household consumption and inventory
accumulation being the primary drivers of this growth. Private sector investment remains subdued.
The labour market has been strengthening (with unemployment being 4.7% in December 2016)
with the US now approaching its NAIRU. We are seeing this in wages growth, with average private
sector hourly earnings increasing 2.9% in December 2016, the largest increase since June 2009.
However, consumer price inflation in US still remains below the Fed’s long run target of 2%. The
increase in inflation from 0.9% mid-year to 1.4% at the end of the year was driven mainly by rising
energy prices.
3.0
2.0
Europe has managed to stablise its growth at about mid-1%, which is modest but it is slowly
chipping away at the unemployment rate. At the end of December 2016 there were about 15.5
million unemployed persons in Europe (EA-19), which translates into a 9.6% unemployment rate
for the region. Youth unemployment remains problematic, with unemployment still near 21%; but
this problem is chronic in countries like Greece, Spain and Italy, where youth unemployment is in
excess of 40%; levels which have the potential to cause generational poverty, social disorder and
fiscal pressure for decades to come.
Germany remains the ‘powerhouse’ of Europe; although output growth slowed to 0.2% in 2016Q3
from 0.4% recorded in 2016Q2. Consumption activities, by both household and government, were
the primary contributors to this growth, with net exports and investment activity recording negative
and flat contributions respectively for the quarter. Despite net exports having little impact on
growth, Germany has the largest current account surplus in the world2 at 9.1% of GDP. Wages
growth remains subdued despite unemployment now being sub-4%. The unemployment rate is
likely to rise once the 500,000 refugees that flowed into Germany last year enter the workforce. It
has been noted that many of these refugees have poor German language skills, and lack formal (or
recognised) qualifications, suggesting their assimilation within the labour market might be
challenging.
2. Relative to GDP
0.0
-1.0
Japan
US
Euro
UK
Australia
Source: KPMG Economics, RBA
Chart 6
Yield Curve-10 year bond less 3 Month T-Bill yield
2.5
2
%
GDP growth in Europe is uneven across member countries. 2016Q3 saw economic growth of
0.3%, primarily due to improvements in consumer spending, while net exports contributed nothing
to this growth. The European Commission has argued there is enough ‘headroom’ for the
introduction of some fiscal expansion – up to 0.5% of GDP for 2017 – to help boost economic
activity for the region. However, this recommendation has been rejected by EuroArea Finance
Ministers who have maintained a ‘neutral’ stance on fiscal policy for the coming 12 months.
1.0
1.5
1
0.5
0
AUS
GER
UK
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All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
US
Source: KPMG Economics, RBA
7
Global outlook
There continues to be instability within the Italian banking sector, even though bad debts have
stabilsed post the introduction of the Atlante Fund to about 12.5% of total bank loans, and despite
the Italian government approving the creation of a €20 billion recapitalisation fund to help ‘bail-out’
problem banks. This instability increased following the failure of the Monte dei Paschi di Siena
(MPS) to raise €5 billion in private capital in order for it to comply with the EU regulations. MPS
instead was required to seek €6.5 billion from the recapitalisation fund.
The Italian budget has also been approved in December 2016 for the coming 12 months. Included
in this fiscal plan is a reduction in company income tax rates from 27.5% to 24%, and the
achievement of a budget deficit of 2.3% of GDP. The budget also confirms that the banking sector
recapitalisation fund will add about 1% to Italy’s debt-to-GDP ratio, which is already at abut 135%
of GDP as at the end of 2016Q3.
From being recognised as one of the ‘PIGS’ post-GFC, Spain is now one of the fastest growing
economies within the European region. In 2016Q3 economic growth was estimated to be 0.7%,
slightly down from the 0.8% recorded in the previous 3-quarters. While economic activity is
improving, unemployment remains high at 18.3% at the end of December 2016 – only Greece
recorded a higher rate of unemployment in the EA-19 region (although in absolute terms Spain has
nearly 4 times as many unemployed people as Greece). The new Spanish government under
Prime Minister Rajoy provided budgets to the European Commission, with deficits of 3.1% and
2.2% targeted for 2017 and 2018 respectively. To help achieve this the government has
announced plans to freeze public sector expenditure at 2016 levels.
350
300
250
Index Number
Government and the banking sector in Italy have both separately experienced a blow in recent
months. A referendum for constitutional change was held in early December 2016 with the Italian
Prime Minister Renzi staking his future on a successful outcome. Unlike the Brexit vote in the UK,
this referendum was unsuccessful, but like the Brexit vote the outcome resulted in the resignation
of the PM.
Chart 7
Index of Selected Commodites
200
150
100
50
0
Crude Oil
Iron Ore
Corn
Source: KPMG Economics, RBA, FRED
Chart 8
World Inflation
10%
9%
8%
7%
% per annum
France is due to hold the 2nd round of Presidential elections in May 2017, which means the
direction of fiscal policy is likely to remain uncertain for the next few months.
6%
5%
4%
3%
2%
1%
0%
Emerging Markets and developing Economies
Advanced Economies
World
Source: KPMG Economics, IMF
© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
8
Global outlook
Japan has just adopted the United Nations 2008 System of National Accounts as its reporting
framework. This change has revealed that GDP was slightly stronger than first thought for the
period 2013 to 2016; with consumption and housing investment greater than initially estimated.
The Chinese economy grew by 6.7% in 2016, marginally lower than the 6.9% growth recorded in
2015. This growth was underpinned by fiscal stimulus policies promoted by the Chinese
Government, as well as the maintenance of accommodative monetary policy. There remains
concerns that this strong growth is obscuring a number of structural problems within the Chinese
economy, including very high debt-to-GDP levels and overcapacity within various heavy industries,
particularly due to the loss making state-owned enterprises operating within the sectors.
The renminbi is continuing to depreciate against the USD, although it has remained generally
stable against its official basket of currencies – suggesting this movement is USD driven, not the
other way around (despite the calls of China being a currency manipulator by the new Trump
Administration). Foreign exchange reserves in China continue to run down, although there are a
number of causes of this including:
• an appreciation in the USD;
• sales by the Central Bank of foreign currency assets to arrest the fall in the renminbi;
• expectations of Chinese nationals with regard to a slowing in the local economy;
• repayment of foreign debt by local companies;
• expectations of higher interest rates in the US; and
• desire of the Chinese private sector to diversify their portfolios through the purchase of
foreign assets.
Chart 9
Exchange Rates (USD)
2.5
160
140
2.0
120
100
1.5
80
1.0
60
Yen Per USD
Currency Per USD
Japan has made some progress in improving its economic performance; and has now experienced
three consecutive quarters of positive economic growth in 2016. Further, housing investment has
recorded growth of +2.6%; net exports are positively contributing to GDP, with exports up by 1.6%
due to a depreciation of the Yen (-4% on a trade weighted index basis over 2016Q4). Business
investment remains stable, although the BoJ Tankan Survey for December shows an improvement
in sentiment by large manufacturers, suggesting 2017 may see an increase in capital spending.
The stagnation of Japanese nominal wages remain a concern, increasing on average by only 0.1%
per annum since 2010 despite the economy being close to full employment (unemployment was
3.1% in November 2016, the lowest level in more than 20 years). The December BoJ meeting on
monetary policy resolved to keep benchmark rates unchanged at -0.1% and maintain a target for
long term interest rates at 0%.
40
0.5
20
0
0.0
Euro (LHS)
Pounds (LHS)
AUD (LHS)
Yen (RHS)
Source: KPMG Economics, RBA
Chart 10
Unemployment rate
30.0%
25.0%
25.0%
20.0%
20.0%
15.0%
15.0%
10.0%
10.0%
5.0%
5.0%
0.0%
0.0%
Dec-16
Jun-16
© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Source: KPMG Economics, ABS, Bloomberg
9
Global outlook
Prior to this exercise in economic disruption the Indian economy had been growing very strongly,
recording growth of about 7.3% in the 12 months to the end of 2016Q3. Government consumption
had risen by more than 15% over that time frame, and this was also further supported by
household consumption growth of nearly 8% and a positive net exports result (due to falling
imports and flat exports). On the downside however, business investment fell by 6%.
Brazil remains in a deep recession, with GDP contracting by nearly 1% in 2016Q3; the seventh
quarterly contraction since late 2015. There was also no positive beacon in this contraction, with
all components of domestic demand falling; private sector investment notably falling by more than
3% in the quarter. In this mix of poor news, inflation has fallen by just under 5% to be in the low6%s at the end of 2016. This has resulted in the benchmark Selic rate being cut by Brazil’s central
bank from 14.25% in October 2016 to 13% by the end of December 2016. Brazil’s budget position
remains challenging, recording a deficit of 9.3% of GDP over the year, with interest payments on
government debt accounting for more than two-thirds of the deficit.
$4.5
$4.0
$3.5
US$ Trillion
India introduced a range of measures on 16 November 2016 aimed at reducing tax evasion and
fighting corruption, although the outcome of these reforms has been a significant disruption to
economic activity. In essence the government took action to demonetise two of the most
commonly used currency notes in terms of value of transactions within the Indian economy. The
announcement meant that those notes would no longer be legal tender from midnight of that day,
but existing currency could be exchanged or banked until the end of December 2016. While the
objective of this extreme policy measure was laudable, its implementation was poor – cash
shortages occurred, consumer panic led to queuing outside of banks, and newly minted bank notes
were incompatible with existing ATMs. By the end of December R14 trillion from the estimated
R15.5 trillion demonetised notes had been taken out of circulation; a much higher proportion than
had been estimated, suggesting the government’s view on the amount of cash held by criminals’
had been greatly exaggerated.
Chart 11
China's Foreign Exchange Reserves, US$ Trillion
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
Source: KPMG Economics, PBOC
Chart 12
Share Price Indices
800
700
600
Index Value
This acceleration in the flight of cash out of China has resulted in government authorities tightening
the rules, including adopting new measures, around various forex transactions. For example:
• in late November 2016 Chinese banks were informed that official approval was now required for
foreign payment transactions valued at US$5 million or more, down from the previous threshold
of US$50 million;
• in December 2016 there was a tightening in the reporting requirements surrounding Chinese
nationals wishing to use their annual forex quota of US$50,000.
500
400
300
200
100
0
US
Japan
UK
NZ
Taiwan
South Korea
China
Australia
Source: KPMG Economics, ABS
© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
10
Global outlook
Growth in Real GDP
Year End December
Annual Inflation
2016
2017
2018
2019
2020
2021
2022
1.7%
1.8%
1.8%
1.9%
1.9%
1.8%
1.8%
Brazil
-3.5%
-1.3%
0.7%
1.8%
2.2%
2.3%
2.5%
Brazil
7.1%
5.6%
5.6%
5.7%
4.9%
4.2%
4.2%
Canada
1.4%
1.7%
2.1%
1.8%
1.5%
1.3%
1.3%
Canada
1.0%
1.7%
1.2%
1.3%
1.4%
1.6%
1.7%
OECD
Americas
Year End December
OECD
2016
2017
2018
2019
2020
2021
2022
1.4%
2.0%
1.9%
1.8%
1.8%
1.9%
1.9%
Americas
Latin America
2.0%
2.2%
2.6%
3.1%
3.1%
2.9%
2.7%
Latin America
5.3%
2.7%
0.9%
2.5%
3.5%
3.9%
4.1%
Mexico
2.0%
2.2%
2.3%
2.5%
2.7%
3.0%
3.2%
Mexico
3.2%
5.9%
3.5%
2.0%
1.8%
2.2%
2.7%
USA
1.7%
2.1%
2.1%
2.2%
2.3%
2.3%
2.2%
USA
1.5%
1.5%
1.7%
1.7%
1.8%
1.9%
2.0%
EMU
1.7%
1.5%
1.4%
1.3%
1.2%
1.2%
1.2%
EMU
0.8%
1.2%
1.3%
1.3%
1.3%
1.3%
1.3%
France
1.1%
1.1%
1.1%
1.2%
1.2%
1.2%
1.2%
France
0.3%
1.0%
1.1%
1.2%
1.2%
1.2%
1.2%
Germany
1.8%
1.7%
1.2%
0.8%
0.7%
0.6%
0.7%
Germany
1.2%
1.0%
1.3%
1.3%
1.3%
1.3%
1.3%
Greece
-0.1%
0.1%
2.4%
2.2%
2.4%
2.6%
2.7%
Greece
0.3%
-0.7%
0.5%
0.9%
1.1%
1.3%
1.3%
Ireland
4.3%
3.4%
2.2%
1.9%
1.6%
1.4%
1.4%
Ireland
0.9%
1.0%
1.1%
1.2%
1.2%
1.2%
1.2%
Europe
Europe
Italy
0.9%
1.0%
1.2%
1.4%
1.5%
1.5%
1.4%
Italy
0.4%
2.1%
1.7%
1.6%
1.5%
1.4%
1.4%
Russian Federation
-0.5%
0.2%
1.0%
2.0%
1.6%
1.5%
1.6%
Russian Federation
5.5%
4.5%
5.2%
5.0%
4.9%
4.7%
4.5%
UK
2.0%
1.1%
1.5%
1.6%
1.8%
1.9%
1.9%
UK
0.7%
2.4%
2.7%
2.5%
2.1%
1.8%
1.8%
1.9%
2.4%
3.1%
3.5%
3.6%
3.7%
4.0%
South Africa
0.7%
2.2%
1.3%
1.6%
2.3%
3.0%
3.5%
2.4%
2.9%
3.2%
2.9%
3.0%
3.1%
3.1%
China
6.7%
5.9%
5.8%
5.5%
5.4%
5.4%
5.5%
China
2.2%
2.2%
1.7%
2.0%
2.1%
2.4%
2.8%
East Asia
4.0%
4.3%
4.4%
4.5%
4.5%
4.4%
4.4%
East Asia
2.3%
1.8%
2.7%
2.7%
2.7%
2.7%
2.8%
Hong Kong
1.6%
2.3%
1.8%
1.7%
1.7%
1.7%
1.8%
Hong Kong
2.3%
1.9%
1.6%
1.7%
1.8%
2.0%
2.3%
Indonesia
5.1%
4.8%
5.3%
5.4%
5.2%
4.9%
4.6%
Indonesia
3.8%
4.7%
4.6%
4.5%
4.3%
4.2%
4.1%
Africa
Middle East
Asia
South Africa
Middle East
13.9%
5.2%
5.5%
5.3%
4.9%
4.5%
4.2%
6.2%
6.5%
5.0%
2.5%
1.4%
1.4%
2.0%
7.1%
6.5%
4.4%
3.7%
3.3%
2.9%
2.4%
Asia
India
7.2%
6.0%
7.8%
6.5%
6.3%
6.2%
6.2%
India
4.0%
1.4%
4.9%
4.9%
4.4%
4.1%
3.9%
Japan
1.0%
0.7%
0.7%
0.5%
0.4%
0.2%
0.1%
Japan
-0.6%
0.8%
0.8%
0.9%
0.8%
0.8%
0.8%
Singapore
1.7%
1.3%
4.0%
3.0%
2.9%
3.0%
3.2%
Singapore
0.3%
-0.1%
1.8%
2.0%
2.3%
2.7%
2.9%
South Korea
2.8%
1.9%
2.8%
3.2%
3.5%
3.6%
3.8%
South Korea
1.3%
1.5%
1.7%
1.8%
1.9%
1.9%
1.9%
Taiwan
1.1%
1.5%
1.8%
1.9%
2.2%
2.5%
2.9%
Taiwan
0.8%
0.5%
1.1%
0.8%
0.8%
0.9%
1.0%
Vietnam
7.6%
2.5%
5.5%
5.2%
4.7%
4.2%
3.8%
Vietnam
3.9%
3.4%
5.2%
5.5%
5.6%
5.5%
5.6%
New Zealand
4.1%
2.7%
3.2%
3.3%
2.8%
2.6%
2.6%
New Zealand
0.0%
1.6%
2.1%
2.1%
2.0%
2.1%
2.3%
3.0%
3.0%
3.4%
3.3%
3.3%
3.3%
3.4%
Oceania
World
Africa
Oceania
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11
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All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
12
Australian
outlook
Australian outlook
There is a growing level of frustration within the business community and general population that
our political leaders, across all levels of government and both sides of politics, are channeling Nero
by ‘fiddling while Rome burns’.
This blunt assessment of our political leadership, and the problems associated with achieving
meaningful reforms for the Australian community and economy, is no better illustrated than in the
recent speech given by Dr Ken Henry. In this speech to CEDA Dr Henry reaffirms four key
challenges facing Australia, including budget repair; a growing, but ageing, population; climate
change mitigation and energy security; and capturing the benefits of the ‘Asian century’. Sadly, Dr
Henry opines he has no confidence in the current Parliament’s ability to achieve urgent and
essential reforms; rather he believes that politicians are more interested in passing insults rather
than achieving meaningful reforms for the betterment of all Australians3.
The 2016Q3 national accounts revealed economic growth of -0.5% q/q on a seasonally adjusted
basis, although the rolling 12-month growth was still positive at 2.5%. The primary driver of this
decline was a reduction in government consumption and investment expenditure. Public sector
non-defence consumption expenditure declined by more than $0.5 billion in 2016Q3, while public
sector investment expenditure fell about $2.2 billion.
Real GDP in the December quarter 2016 grew at a strong 1.1%, driven by increased household
consumption (0.9% q/q) and exports (2.2% q/q). In contrast to the September quarter, public
sector spending on gross fixed capital increased markedly, with Tasmania standing out recording
21% quarterly growth, while South Australia (14%), Queensland (13%) and Victoria (12%) also
achieved substantial increases.
Non-dwelling construction activity recorded positive growth in 2016Q4, its first positive quarter
since the middle of 2014. New non-residential buildings and engineering construction activity both
recorded positive growth, and while ‘one swallow does not a summer make’4, it is a encouraging
sign that these sectors may have bottomed and are now turning up from an economic contribution
perspective. Expenditure on dwelling investment was marginally positive, albeit weak; further
suggesting the non-housing residential sector is likely to experience a slowing of activity in the
short term.
Consumer price inflation increased by 0.5% in the December quarter 2016, resulting in annual
inflation of 1.5% for the calendar year; still below the Reserve Bank’s 2% to 3% target band. It is
expected that inflation will rise over the coming 12 months; we have already seen a jump in
domestic producer prices of 0.7% in final quarter of 2016.
Chart13
GDP Growth by Component
4.0%
4.0%
3.0%
3.0%
2.0%
2.0%
1.0%
1.0%
0.0%
0.0%
-1.0%
-1.0%
-2.0%
-2.0%
C
I
G
NX
SD
GDP-Qtr
GDP-Annualised
Source: KPMG Economics, ABS
Chart 14
Annual Rate of Inflation by CPI Group
Year ended December 2016
Insurance and financial services
Education
Recreation and culture
Communication
Transport
Health
Furnishings, household equipment and services
Housing
Clothing and footwear
Alcohol and tobacco
Food and non-alcoholic beverages
All groups CPI
3.
4.
http://news.nab.com.au/nab-chairman-ken-henrys-speech-at-ceda/
Aristotle, 384 BCE – 322 BCE
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Source: KPMG Economics, ABS
14
Production
Iron ore production continues to ramp up; a total of 220 million tonnes was produced in 2016Q3.
The Department of Industry, Innovation and Science (DIIS) anticipate production of 880 million
tonnes and 923 million tonnes in FY17 and FY18 respectively. This increase in output is also
being supported by productivity improvements that were driven in the sector when market prices
collapsed. This increase in domestic production is bound for export markets making Australia,
which accounts for around 54% of the seaborne iron ore market, the dominant global iron ore
supplier.
Similar to iron ore, Australia has the dominant supplier position in the world market for metallurgical
coal, even though the sector produced about 11% less in 2016Q3 than in 2016Q2 as a
consequence of several factors, including industrial relations disputes and adverse weather
conditions. The December quarter 2016 also saw challenging conditions negatively impact
production, including the temporary closure of the Illawarra Coal Appin mine due to high levels of
methane gas detected at the site.
12%
10%
Proportion of Total GVA
ABARES latest crop report (February 2017) indicates that the summer crop is likely to be reduced
due to drier and warmer climatic conditions which occurred over the previous 3 months. Dryland
crops have been most affected, although due to good supplies of irrigation water, cotton and rice
crops are not anticipated to be too negatively impacted by adverse seasonal conditions. While the
summer crop outlook appears challenging, harvesting of the winter crop is nearly finished, with
every mainland state seeming to have achieved record production. Total winter production is
estimated to have increased by nearly 50% to about 59 million tonnes, of which wheat production
has grown by 45%, barley production 56%, canola production 41% and chickpea production 40%.
Chart 15
Proportion of Gross Value added by Industry, Australia, 2016
8%
6%
4%
2%
0%
Source: KPMG Economics, ABS
Chart 16
Change In Gross Value Added by Industry, Australia, 2016
Percentage Change fromPrevious Year
Production of goods and services as a proportion of total GDP remained just over 84% in the
December quarter 2016, a level that is slightly higher than recent averages. In terms of industries,
Finance and Insurance Services, Construction and Mining remain the three largest sectors within
the Australian economy, accounting for nearly 28% of industry GVA (IGVA). Manufacturing
continues to decline as a proportion of domestic production activity across the economy, now
representing 6.8% of IGVA. A small decline in the production of machinery and equipment
collectively drove the latest fall in relative importance of the manufacturing sector.
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
Profits before tax grew an incredible 470% in the mining industry in the final quarter of 2016, again
as a direct result of the improvements in the global price of iron ore and coal. The profitability of
the remaining sectors in the Australian economy also grew a substantial 20% over the quarter.
Source: KPMG Economics, ABS
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15
Consumption
Chart 17
Motor Vehicle Sales and Retail Trade Turnover
Just under 100,000 motor vehicles were sold in Australia during January 2017, an increase of 0.6%
(or about 600 vehicles) over sales in in the previous month. A total of 1.17 motor vehicles have
been sold in Australia over the 12-months to the end of January 2017, an increase of 1.4% over
the same previous 12-month period. The trend towards SUV vehicles continues, with 38% of all
vehicles sold coming from this class; up from 35% 12 months ago. This growth in SUV sales is
coming at the expense of passenger vehicles, which have fallen as a percentage of total sales from
44% for the 12-months to January 2016 to 41% over the past 12-months.
Consumer sentiment, as measured by the Westpac-Melbourne Institute Index, declined in the last
two months of 2016 and also stayed low in January 2017. Latest survey results show consumer
sentiment has increased in February 2017, but remains just below the index value of 100, which
reflects a balance of optimists and pessimists within the 1,200 survey respondents. While the
current index value suggests a neutral position on consumer sentiment, there continues to be an
overall upward trend in values since late 2015 - early 2016.
Sales of New Motor Vehicles
Household goods retailing saw the strongest quarterly growth of the six expenditure categories
contained in the ABS Survey of Retail Trade, up 2.0%; followed by food retailing which grew 1.1%.
Surprisingly cafes, restaurants and take-away food services grew by only 0.6% for the quarter,
although this is coming off the back of 2.7% growth over 2016Q3, 1.5% growth over 2016Q2, and
4.1% on a rolling year-on-year basis.
27,000
100,000
25,000
95,000
23,000
90,000
85,000
21,000
80,000
19,000
75,000
17,000
70,000
15,000
65,000
Motor Vehicle Sales (LHS)
Retail Trade Turnover (RHS)
Source KPMG Economics, ABS
Chart 18
Consumer Confidence
130.0
120.0
Consumer Sentiment Index
Retail sales shows quarterly growth of 1.1% on a current dollar, seasonally adjusted basis, during
the final quarter of 2016. New South Wales recorded much stronger growth (1.2%) in 2016Q4
compared to the 0.4% achieved in 2016Q3. The Northern Territory recorded the strongest growth
of all states and territories in 2016Q4 at 1.8%, which is impressive given that negative growth of 0.3% was recorded in 2016Q3.
105,000
Retail Sales
Household consumption expenditure grew 0.9% in seasonally adjusted terms in 2016Q4, and 2.7%
on a rolling 12-month basis. Victoria recorded the highest quarterly household consumption growth
of all the states and territories, up 1.3% over 2016Q3 and 3.1% on a rolling 12-month basis.
Western Australia recorded growth of -0.1% in the quarter, but 1.6% for the year.
110.0
100.0
90.0
80.0
70.0
Source: KPMG EConomics, ABS
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16
Investment
Gross fixed capital formation grew by 2.6% during 2016Q4, with both private and public sectors
recording positive investment activity in the December quarter (up 1.5% and 7.7% respectively).
Chart 19
Private Capital Expenditure By Industry Sector
30000
The increase in private sector gross capital formation was most pronounced within the construction
sector, with non-dwelling investment in new buildings up 5.0%, while engineering construction grew
at 1.3%. Spending on machinery and equipment (1.0%) and intellectual property (1.5%) grew over
the quarter.
20000
$ Millions
Public corporations, especially ones associated with the Commonwealth Government, recorded
strong growth in gross fixed capital formation, up 9.0% in 2016Q4. This solid growth was
supported by general government gross fixed capital expenditure, which grew by slightly more than
7% in the December quarter. Defence related capital expenditure accounted for about two-thirds of
this increase – some $640 million.
25000
10000
5000
While the national accounts show private sector investment activity improving – at least when
compared to the September quarter 2016 – there still appears to be an expectation that private
sector investment activity will fall during 2017. Interestingly, the 2016Q4 ABS Survey of Private
New Capital Expenditure revealed a decline in private sector capex spend of nearly $600 million (in
real, seasonally adjusted terms) compared to the September quarter 2016. Investment expenditure
in building and structures fell $650 million in the quarter, while plant and equipment achieved
growth of $50 million. The survey also showed investment spending was mixed across
jurisdictions, with Victoria, Northern Territory, Tasmania and the ACT recording positive growth,
while New South Wales, Queensland, Western Australia and South Australia all recording falls.
0
Mining
Manufacturing
Other Selected Industries
Source: KPMG Economics, ABS
Chart 20
Value of Residential and Non-Residential Approvals
120,000
100,000
80,000
$ Millions
The ABS Private New Capital Expenditure survey showed that Queensland and Western Australia
combined recorded nearly $1 billion less in capital expenditure on building and structures in
2016Q4 relative to 2016Q3. This decline is consistent with survey respondents expected
expenditure for the remainder of FY17 and FY18. Latest forward estimates indicate total spend on
new capital of about $112 billion and $81 billion in FY17 and FY18 respectively, which compares to
$127.6 billion for FY16. However, if average realisation ratios are applied to these estimates, FY17
is still likely to achieve current estimates of about $112 billion in total new private capital
expenditure, but FY18 may see capex spend increase to something like $102 billion.
15000
60,000
40,000
20,000
-
Residential
Non-Residential
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Source: KPMG Economics, ABS
17
Labour market
Chart 21
Unemployment and Participation Rates
The size of Australia’s labour force is now 12 million employed persons, about 103,400 more
workers than the number employed at the beginning of 2016. However, this increase in
employment has come at the expense of full time positions, which shrank by about 56,000 over the
12 months to January 2017. In contrast, part time employment grew by nearly 160,000 positions.
There remains about 720,000 Australians looking for employment, which translates into an
unemployment rate of 5.7% (in seasonally adjusted terms). The two largest states of New South
Wales and Victoria account for nearly 55% of total unemployment, while the mining states of
Queensland and Western Australia have about 157,000 and 93,000 persons unemployed.
65.5
5.5
4.5
64.5
4.0
64.0
3.5
63.5
3.0
Hidden unemployment, recognised as ‘underemployment’, is an increasing problem for many in the
labour force. Those wishing to work more hours represent nearly 9% of total people employed,
although this increases to nearly 11% for female workers.
Unemployment rate
Participation rate
Source: KPMG Economics
Chart 22
Private Sector - Public Sector Wage Growth
The ANZ Job Advertisements Series showed a 4% increase in the number of job ads in January
2017 over December 2016, and a 7% increase on a year-on-year basis, suggesting the labour
market in Australia is improving sufficiently enough to pull down the unemployment rate gradually
over the coming 12 months.
1.2%
1.0%
0.8%
q/q %
The modest growth in employment during 2016 did not pressure labour markets and as a result
growth in wages has been anemic. While the labour market might tighten during the remainder of
2017, wage growth is expected to remain modest. Nominal ordinary time hourly rates of pay
(excluding bonuses) grew, on average, by 2.0% during the year to December 2016, the lowest rate
of growth since the series commenced nearly 20 years ago. However, there is a notable difference
between public and private sector wages growth; with the public sector recording average growth
of 2.3% compared to 1.8% for the private sector. The healthcare and education sectors recorded
the highest wages growth of all private sector industries at 2.4%, while mining achieved the lowest
wage growth of 1.0%.
65.0
5.0
Participating Persons (%)
The labour market participation rate is sitting marginally higher than the average for the past 20
years, although there has been a declining trend in participation since the middle of 2015.
66.0
6.0
Unemployed Persons (%)
From a gender perspective, the additional workers have been predominately female, although
female workers bore a much higher proportion of the full time job losses (35,000), but they also
captured the majority of the part time positions (117,000).
6.5
0.6%
0.4%
0.2%
0.0%
Private Sector Wage price Index
Public Sector Wage price Index
Source: KPMG Economics, ABS
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18
Government
Australia’s net debt position is expected to deteriorate, rising to $317 billion this year, and
progressively increasing to be approximately $364 billion by the end of FY20. A consequence of
this increase in net debt is a rise in net interest payments made by the government, up from $12.3
billion in FY17 to $14.7 billion in FY20.
Spending remains relatively high as a percentage of GDP. In the MYEFO government spending as
a proportion of GDP is projected to be 25.2% in FY17 (down from the 25.8% projected in the
PEFO) and to stay at this level for the remainder of the forward estimates period.
The 2016Q4 Government Finance Statistics reveal a near 18% lift in taxation receipts over
2016Q3, although when compared to 2015Q4 they are about 4% higher. While tax receipts are
higher, general government expenses in 2016Q4 are more than $6.5 billion higher than the same
period in 2015, of which labour costs represent $1.5 billion. State governments have incurred
nearly 90% of this increase in general government labour costs.
0.0%
0
-5,000
Underlying Cash Balance ($M)
-0.5%
-10,000
-1.0%
-15,000
-20,000
-1.5%
-25,000
-2.0%
-30,000
% of GDP (Nom)
Despite this poor fiscal outlook the Treasurer is still predicting the budget will return to surplus in
FY21; a prospect KPMG believes is unlikely without significant reforms to government receipts,
expenditures or both. The Treasurer also conceded in the MYEFO statement that forward
estimates for tax receipts was overly optimistic, and revised these down by nearly $31 billion over
the coming four years. This deterioration in the budget outlook is being driven by lower forecasts of
personal income tax revenue, driven by weak growth in wages. Despite a substantial increase in
commodity prices, particularly in thermal coal (up from US$55/MT at May 2016 to US$90/MT in
January 2017) and iron ore (US$56/MT to US$80/MT), corporate income tax receipts are unlikely
to experience a material uplift due to utilisation of accumulated net operating losses within the
mining sector.
Chart 23
Commonwealth Budget Balance
-35,000
-2.5%
-40,000
-3.0%
-45,000
FY15
FY16
FY17
FY18
FY19
FY20
Underlying Cash Balance - Treasury
Underlying Cash Balance - KPMG
Deficit as % of GDP - Treasury
Deficit as % of GDP - KPMG
Source: Commonwealth Treasury, KPMG Economics
Chart 24
Government expenditure as % of GDP
$ real, seasonally adjusted
26%
25%
24%
% of GDP
The Treasurer presented the Commonwealth Government’s Mid-Year Economic and Fiscal
Outlook on 16 December 2016. The primary messages contained in this statement include a
marginal improvement in the expected budget deficit for FY17 from $37.1 billion to $36.5 billion;
although aggregate deficits in the forward estimates period are expected to increase by about $11
billion to nearly $95 billion.
23%
22%
21%
20%
Source: KPMG Economics, ABS
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19
Net exports
Australia’s exports of services is continuing to grow, reaching $71.5 billion n 2016, with education
services ($21.7 billion) continuing to grow on the back of stronger economic growth in target
overseas countries, like China, Singapore and Malaysia. This growth is also being supported by a
more competitive exchange rate (as compared to FX rates of 2011 to 2013).
Chart 25
Merchandise Exports by Type, (FOB Value, Original)
30,000
25,000
$ Millions, Original
The improvement in commodity prices, especially iron ore and coal, is having a significant positive
impact on Australia’s trade balance. In November and December 2016 the trade balance recorded
a surplus (in seasonally adjusted terms) of $2 billion and $3.5 billion respectively. Total exports of
goods and services in 2016Q4 were some $10 billion higher than in 2016Q3. While the
sustainability of commodity price increases is uncertain, Australia’s production of commodities for
export are anticipated to continue to ramp up, at least into the medium term, helping improve the
current account as a consequence.
20,000
15,000
10,000
5,000
-
Australia’s net export position is projected to improve through the significant ramp up in LNG
exports. DIIS anticipate LNG exports to increase from nearly 37MT in FY16 to 54MT in FY17 and
then 67MT in FY18, generating some $20 billion in additional export revenues.
Australia’s Terms of Trade (ToT) has lifted significantly as a consequence of the rise in commodity
prices, up 9.1% over the December quarter, and 15.6% since the beginning of 2016. KPMG
expects a further increase in 2017, however, this growth will be moderate, and more generally we
believe the strength in the ToT is likely to be short lived, with an anticipated steady decline in its
outlook.
The Australian dollar appreciated over the final quarter of 2016, and is currently trading at USD
0.768c. Further increases in the US FFR, combined with the likely maintenance of the current
cash rate by the Reserve Bank, suggest that the AUD will come under pressure over the remainder
of 2017. KPMG’s forecasts have the AUD/USD exchange rate settling around the USD 0.74c level
for the immediate future.
Food and live animals
Coal and coke
Gas
Machinery and transport
Total
Metalliferous ores
Petroleum and related materials
Manufacturing
Gold (non-monetary)
Source: KPMG Economics, ABS
Chart 26
Terms of Trade, Australia
160
140
120
Index Number
December quarter 2016’s Balance of Payments showed the Current Account had narrowed to -3.8
billion (in seasonally adjusted, current dollar terms), an improvement of $6.3 billion over 2016Q3.
This is the ‘best’ quarterly result since the September quarter 2001. This improvement was driven
by revenue from net exports growing by nearly $8.3 billion; although net primary income deficit
worsened by about $1.8 billion to be just over $8 billion for the quarter.
100
80
60
40
20
0
Terms of Trade
Long-Term Average
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All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Source: KPMG Economics, ABS
20
Forecast assumptions
Changes in key assumptions impacting KPMG’s Economics forecasts since November 2016
include:
Global
•
a rise in 10-year bond yields in most jurisdictions through 2017;
•
a tightening in the spread between sovereign bonds and corporate bonds, suggesting the
margin for corporate borrowing compresses;
•
oil prices stablising to trade in a tight range of US$54/bbl to $58/bbl until the end of 2018;
•
equity prices to retreat from recent high’s once the ‘sugar hit’ from the commencement of the
Trump Administration in the US wear’s off
Australia
•
residential construction activity to soften in 2017 and 2018 due to a moderation in non-housing
construction;
•
non-mining business investment to continue to steadily rise, although the decline in mining
investment will continue to swamp aggregate investment such that negative growth remains in
FY17;
•
household consumption activity to be limited by high debt levels, anemic wages growth and
moderate employment growth;
•
limited fiscal reforms in Australia, thereby keeping the effective corporate tax rate and effective
personal income tax rate the same as in FY16, with government spending also to be
maintained at levels forecast in the recent MYEFO statement.
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All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
21
Australian outlook
FY16
FY17
FY18
FY19
FY20
FY21
FY22
GDP (Real)
2.7%
1.8%
2.9%
2.9%
3.1%
3.0%
2.8%
Private Consumption
2.9%
2.4%
2.7%
2.8%
2.9%
3.0%
2.9%
8.5%
2.1%
-2.2%
4.0%
4.2%
1.9%
1.4%
-11.0%
-4.5%
5.8%
2.4%
2.5%
3.1%
2.5%
Consumption
3.7%
2.8%
2.1%
2.0%
2.0%
2.1%
2.2%
Investment
2.7%
-0.9%
-4.6%
-1.9%
-1.4%
0.8%
1.4%
Total domestic demand
1.3%
1.3%
2.3%
2.5%
2.6%
2.7%
2.5%
Export volumes
6.7%
5.9%
5.9%
5.1%
5.0%
5.0%
5.1%
Import volumes
-0.3%
3.7%
3.2%
3.5%
3.6%
4.0%
3.9%
Inflation (1)
1.0%
1.5%
1.6%
2.1%
2.3%
2.5%
2.6%
Real Personal Disposable Income
1.6%
2.3%
2.8%
2.8%
3.0%
3.0%
2.8%
Unemployment, % (1)
5.7%
5.4%
5.4%
5.2%
5.1%
5.2%
5.3%
Government Balance as % of GDP
-2.3%
-2.3%
-1.4%
-0.9%
-0.8%
-0.9%
-1.0%
Govt. debt as % of GDP
44.2%
45.7%
45.8%
45.0%
43.6%
42.2%
40.9%
Current account as % of GDP
-4.4%
-2.1%
-1.4%
-1.2%
-1.1%
-0.9%
-0.7%
$A/US$ (1)
0.746
0.744
0.741
0.740
0.741
0.743
0.745
96.7
97.0
96.2
95.3
95.0
94.6
94.0
Investment
Housing
Business
Government
Terms of Trade (1)
(1) = Value at end of the year
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All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
22
© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
23
KPMG Economics
Contact us
Brendan Rynne
Melbourne
Tel: 03 9288 5780
[email protected]
KPMG does not make any statement in this report as to whether any forecasts or
projections included in this report will be achieved, or whether the assumptions and
data underlying any prospective economic forecasts or projections are accurate,
complete or reasonable. KPMG does not warrant or guarantee the achievement of
any such forecasts or projections. Any economic projections or forecasts in this
report rely on economic inputs that are subject to unavoidable statistical variation.
They also rely on economic parameters that are subject to unavoidable statistical
variation. While all care has been taken to account for statistical variation, care should
be taken whenever considering or using this information. There will usually be
differences between forecast or projected and actual results, because events and
circumstances frequently do not occur as expected or predicted, and those
differences may be material. Any estimates or projections will only take into account
information available to KPMG up to the date of this report and so findings may be
affected by new information. Events may have occurred since this report was
prepared, which may impact on it and its findings.
The information contained herein is of a general nature and is not intended to address
the specific circumstances of any particular individual or entity.
© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
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© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation.
The information contained in this document is of a general nature and is not intended to address the objectives,
financial situation or needs of any particular individual or entity. It is provided for information purposes only and
does not constitute, nor should it be regarded in any manner whatsoever, as advice and is not intended to influence
a person in making a decision, including, if applicable, in relation to any financial product or an interest in a financial
product. Although we endeavour to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should
act on such information without appropriate professional advice after a thorough examination of the particular
situation.
To the extent permissible by law, KPMG and its associated entities shall not be liable for any errors, omissions,
defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on
such information (including for reasons of negligence, negligent misstatement or otherwise).