BT Monthly Markets Chart Pack – January 2009

1. BT Monthly Markets Chart Pack – January 2009 An overview of movements in global financial markets

2. Global share markets finished weaker in the first month of 2009... • Global share markets got off to a rocky start in 2009, with all the major indices taking a hit in January amid further evidence that the world economy is undergoing a significant slowdown.In the US, the benchmark S&P 500 Index fell 8.6% while markets in Europe (-8.7%), the UK (-6.4%) and Japan (-9.8%) also closed significantly in the red. • The Australian share market fell for the fifth month in a row in January, with the S&P/ASX 200 Accumulation Index closing 4.9% lower amid rising unemployment and concerns that the economy is headed for its first recession since 1991.

3. …but continue to perform well over the long-term, 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. The Australian share market closed 4.9% lower in January S&P/ASX 200 Accumulation Index – year to 31 January 2008 Source: BT Financial Group, Premium Data

5. Key Australian economic news – January • The Reserve Bank of Australia cut interest rates by a full 1.00% at its February meeting, taking the official cash rate to just 3.25% - it’s lowest level since early 1964. • The Westpac/Melbourne Institute’s consumer confidence survey fell by 2.2% in January to be 12.8% lower for the year. • The unemployment rate moved slightly higher again in December, this time to 4.5% (was 4.4% in November). • After falling 12% in November, newspaper job advertisements fell even further in December, this time by 13.9%. It was the third consecutive month in which newspaper job advertisements have fallen by more than 10%. • Australia’s trade balance came in below market expectations in November, narrowing to A$1.45bn on the back of falling exports. Source: BT Financial Group

6. The Australian dollar loses ground against all the major currencies • The Australian dollar (A$) fell 10% against the US dollar (US$) in January, giving up all of last month’s gains as weaker commodity prices and a resurgent US$ combined to push our own currency lower. Since its high of US$0.9849 cents back in July last year, the A$ has now fallen 36% against the US$ and it’s difficult to imagine any sort of sustained recovery in the near-term if global growth remains weak and commodity prices continue to trend lower. • At the end of January: A$1 bought US$0.6347 -10.1% €0.4971 -1.8% ¥57.07 -11.0% Source: BT Financial Group

7. The Australian dollar versus the US dollar… Currency markets – A$ per US dollar Source: BT Financial Group. Figures at 31 January 2009

8. the Euro… Currency markets – A$ per Euro Source: BT Financial Group. Figures at 31 January 2009

9. and the Yen Currency markets – A$ per Yen Source: BT Financial Group. Figures at 31 January 2009

10. Official world interest rate movements – January • Both the European Central Bank and the Bank of England cut their official interest rates in January while the US Federal Reserve and the Bank of Japan left their rates on hold. Here in Australia, the Reserve Bank cut the official cash rate by 1.00% at its early February meeting. Source: BT Financial Group

11. Global share market returns 31 January 2009 Source: BT Financial Group

12. Short-term asset class performance 1-year rolling returns to 31 January 2009 (%) 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

13. Short-term asset class performance (cont’d) 1-year returns to 31 January 2009 (%) 31 January 2008 31 January 2009 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

14. Long-term asset class performance 31 January 2009 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, UBS Bank Bill 0+ years

15. Oil prices fell for the seventh consecutive month in January amid rising stockpiles and weaker demand Oil prices – US$ per barrel Source: BT Financial Group. West Texas Intermediate oil price at 31 January 2009

16. Summary • There is mounting evidence that the Australian economy is on the brink of its first since recession since 1991, particularly with unemployment now at its highest level in almost two years. That said, the Rudd government has shown that it’s ready to act by way of additional stimulus measures should economic conditions continue to deteriorate. • In terms of interest rates, it would seem that inflation is no longer as much of a concern as it was last year for the RBA, meaning the Bank has some scope to cut the official cash rate even further in the coming months should the need arise. • With global growth set to slow even further and with commodity prices likely to remain under pressure in the months ahead, it’s hard to see a sustained recovery in the Australian dollar in the near-term. • 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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