Download 1. Tasmania`s Potential for Growth in a World Market

Tasmania’s potential for growth in a world market
2008 Tasmanian Dairy Conference
8th October 2008
Frank Drum – NAB Agribusiness Economist
Discussion outline
• Macro Economic Outlook
• Potential for growth in world markets
• Summary
World economic growth - Disparate
World GDP Growth
10
9
Forecast
Emerging economies
% annual change to quarter shown
8
7
6
5
Global growth
4
3
2
Developed economies
1
0
Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10
Key drivers to global outlook
• Lagged effect of further weakness in equity
markets, and high oil prices.
• Further weakness in housing markets globally
• Credit availability in US and Europe
• Lower consumer and business confidence
• China…largely insulated from global problems…
Australian economic cycle
Sustained but slower “real” GDP growth for next couple of years
Medium term driven by the 4 P’s….Population, Participation, Productivity ….Politics/Policy
6.5%
6.5%
5.5%
5.5%
4.5%
4.5%
3.5%
3.5%
2.5%
2.5%
1.5%
1.5%
0.5%
0.5%
-0.5%
-0.5%
GDP
GDP excl. primary resources
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-05
Dec-04
Dec-03
Dec-02
Dec-01
Dec-00
Dec-99
Dec-98
Dec-97
Dec-96
Dec-95
Dec-94
Dec-93
Dec-92
Dec-91
Dec-90
-2.5%
Dec-89
-2.5%
Dec-88
-1.5%
Dec-87
-1.5%
Dec-86
% change - 12 months to
Australian GDP: Economy-wide v Excl. Farming & Mining
Key watch issues for Australia
• Further deterioration in global financial instability
• Further increase in global oil prices
• Government policy
• Sustained drought
• Brazil, Russia, India and China….
Australian cash rate forecast
9
8
7
6
5
4
3
2
1
%
Dec-95 Dec-97 Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09
Exchange rate outlook
1
0.9
0.8
0.7
0.6
0.5
0.4
Sep-85
Sep-89
Sep-93
Sep-97
Sep-01
Sep-05
Sep-09
Macro Summary
• Global economic growth is slowing
• Growth in emerging economies to remain strong
• In Australia – slower but sustained growth
• Business – slower & a lot riskier
• Households -
spending,
unemployment
Growth Prospects for Tasmanian Dairy
Key growth Factors
• Developing new markets
• Production costs
• Key competitors
Long term growth prospects
Income & Real GDP Growth: Averages 1997-2007
Average GDP Growth
10
9
8
7
6
5
4
3
2
1
%
China
India
Singapore
Iran
Korea
Australia
Brazil
New Zealand
US
Japan
5000
10000
15000
20000
25000
30000
Average GDP per Capita (US$)
35000
40000
Per capita consumption of
liquid milk & cheese
●
China and India have low per capita consumption of milk products.
●
As incomes rise and access to refrigeration increases there is scope for
spectacular increases in consumption. We are already starting to see signs of
that…
Annual meat consumption
US
China
India
EU
140
120
100
80
60
40
20
Kg/person
1986
1991
1996
2001
2006
2011
2016
Production Costs
Feed Costs
Northern Victoria & Riverina
Southern & Central NSW
Northern NSW and QLD
South Australia
Gipplsland
2007-08
2006-07
Western Victoria
Western Australia
Tasmania
%
10
20
30
40
50
60
Biofuel explosion
Production of Ethanol and Biodiesel in the US and EU
Fertiliser costs
Western Australia
Tasmania
Gipplsland
Western Victoria
Northern NSW and QLD
2007-08
2006-07
South Australia
Southern & Central NSW
Northern Victoria & Riverina
%
5
10
15
20
Input cost pressures
500
Chemicals
Fuel and Lubricants
Fertiliser
Total Cash Cost
450
400
350
300
250
200
150
index
1990-91 1993-94 1996-97 1999-00 2002-03 2005-06 2008-09
Australian weighted petrol price
160
140
120
100
`
80
60
Ac/L
Dec-98
Dec-00
Dec-02
Dec-04
Dec-06
Dec-08
Dec-10
Global Players
• New Zealand
• European Union
• South America, India and China
New Zealand
Short term
• 8-10% increase in 2008-09 production
• Further dairy conversion
Medium term
• Export growth into OPEC
• Improved market access – FTA with China
Net Exports of Dairy from the EU
3500
3000
2500
2000
1500
1000
500
000' tonnes
1999 2000
2001 2002
2003 2004 2005
2006 2007
New Players
30
India
China
Brazil
24
18
12
6
%
1999 2000 2001 2002 2003 2004 2005 2006 2007
Summary
• Global economic environment is slowing
• Increasing demand for protein remains long term
trend
• Opportunities exist
• Challenges
– Emerging markets
– Cost competitiveness
– Changing nature of global dairy environment
Important Notices
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Bank Funding Watch - Spreads
Short Term Funding Costs
140
basis point spread between 3mth BBSW/Libor and the
3mth overight index swap
Medium Term Funding Costs
180
Bank spread to swap - 2-3 year
160
120
International
Banks
140
100
120
Aus
80
100
US
60
80
Euro
60
Domestic
Banks
40
40
20
20
0
Oct 05
Apr 06
Oct 06
Apr 07
Oct 07
Apr 08
Oct 08
0
Oct 05
Apr 06
Oct 06
Apr 07
Oct 07
Apr 08
Oct 08