After The GFC The Outlook For The Building Industry And Victoria

Transcription

1 Industry Breakfast Olympic Room MCG. Melbourne April 22, 2010 After The GFC The Outlook For The Building Industry And Victoria Phil Ruthven, Chairman WHERE KNOWLEDGE IS POWER

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4 World GDP Growth Real growth (PPP), (F) Purchasing Power Parity (PPP) terms % % % (F) % (F) Past 25 years 3.5% p.a growth in US$ market terms IMF/Economist//IBISWorld: 30/03/10

5 Poland 1.0% S. Arabia 0.8% Argentina 0.8% Thailand 0.8% S. Africa 0.7% Egypt 0.6% Pakistan 0.6% Colombia 0.6% Malaysia 0.6% Belgium 0.5% 11 th 20 th Nations 14.8% 2.5% Italy 2.9% Mexico 2.1% Spain 1.9% Korea S 1.9% Canada 1.9% Indonesia 1.4% Turkey 1.3% Australia 1.2% 17th Iran 1.2% Taiwan 1.0% Netherlands 0.9% 21 st 30 th Nations 7.2% Brazil 3.0% France 3.1% Purchasing Power Parity (PPP) terms 3.1% Rest of World (198 nations) 15.5% 4.0% India 5.3% World s 228 nations US$ 72.1 trillion 20.5% USA 13.3% China 6.0% CIA/IBISWorld 08/02/10

6 Economic Growth: 2009 (F) 20 Largest Economies (ppp ranking) World Growth 2008, -2.5% The Economist/IBISWorld 11/04/10

7 Economic Growth: 2010(F) 20 Largest Economies (ppp ranking) World Growth 2010 (f), 2.5% The Economist/IBISWorld 11/04/10

8 Economic Growth: 2011(F) 20 Largest Economies (ppp ranking) World Growth 2011(f), 2.9% The Economist/IBISWorld 11/04/10

9 % pa % pa % pa SSBC/IBISWorld: 24/03/10

10 OECD/IBISWorld 24/03/10

11 Economic Growth: USA Annualised trend growth in GDP (% p.a) to December 2010 (F) Forecast to December 2010 shown Long business cycles, average 8.5 years Source: US BEA 09/10/09

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13 Australian Index of Consumer Sentiment 2 months progressive to March 2010 Recession Level Source: Westpac-Melbourne Institute (IAESR), IBIS estimates 11/03/10

14 Indexes of Consumer Sentiment 12 months progressive to March 2010 Australia happy 69% of years USA only happy 45% of years Australia Recession Level Australia Recession Level USA USA Source: IBISWorld, Consumer Research Centre USA, Westpac/Melbourne Institute

15 Economic Growth Annual real GDP growth (%) progressed in quarters to December 2009 (and forecast to June 2013) Average long business cycle is 34 quarters (8 1 / 2 years) Forecast 36 qtrs. 34 qtrs 34 qtrs 33 qtrs 38 qtrs 33 qtrs? 36 qtrs? Years, ended June Source: IBISWorld: 04/03/10

16 Capital Expenditure 28.5% The Market Economy December 2009 Govt. CapEx GBEs GG Exports less imports 0.6% Consumption Expenditure 71.5% Company CapEx 2 Consumption 1 6.6% 16.4% Consumption % 55.2% Household Consumption State & Local Government 1 Mainly on behalf of households 2 Incl. Ownership Transfer Costs (1.2%) and inventory change (-0,8%) Gross National Expenditure (GNE) $1290 billion (current prices) Source: ABS/IBISWorld 05/03/10

17 Consumption Expenditure Growth 4 qtr moving average to December 2009 Recessions do not occur from collapsing consumption expenditure (mainly households), but from capital expenditure which does go severely negative every 8.5 years. Source: ABS: (04/03/10)

18 Capital Expenditure Growth 4 qtr moving average to December 2009 Recessions occur when GFCE falls more than 8% Years, ended June Source: ABS /03/10

19 Capital Expenditure 28.5% of GDP Components Of Investment Year 2009 Nat Govt. IP & Other Intangibles State/Local Govt Dwellings 19.3% 14.4% 4.0% 9.2% 26.0% Machinery & Equipment 4.5% 10.4% Buildings 12.2% Engineering Construction Investment (GFCF) F) $359.7billion Source: ABS/IBISWorld 22/03/10

20 Australia s Industry Mix Value added basis Shares of GDP in constant F2007 price terms C2009 Hospitality (2.2%) Education 4.1% Ind. Taxes 8.1% Pers. & Other Serv. Cult & Rec. Serv. 1.8% Agriculture 2.6% Mining 6.8% 8.4% Manufacturing Utilities 2.4% Govt. Adm. 5.0% O Ship Dwells. 7.2% 11.3% Prop. & Business Services 9.9% Finance & Ins. 4.9% Transport 6.9% Construction 4.5% W Saling 4.5% Retailing 2.8% Communications GDP $1260 billion (current prices) $1208 billion (constant F2008) Sectors Primary Secondary Tertiary Quaternary Quinary ABS /IBISWorld

21 Australian Industries Growth CAGR (trend), last 5 years to C2009 (constant prices) Percent Source: IBISWorld 13/04/10

22 Australian Industries Growth CAGR (trend), next 5 years to C2014 (constant prices) Percent Source: IBISWorld 13/04/10

23 Indicator Lending Rate Maximum Overdraft Rate IBISWorld 04/12//08

24 Indicator Lending Rates Australia F (F) Credit Cards Interest Rate (%) Overdraft (small business, variable) Mortgage (standard bank) Year, ended June Source: IBISWorld/Reserve Bank

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26 The Australian Construction Industry Growth (% real change in value added, 4qtr moving ave) December 2010 Major downturns mirror long business business cycle in economy (8 1 / 2 years) Year, ended June

27 The Australian Construction Industry By Activity 2009 Buildings 21.3% Dwellings 28.3% 50.4% Engineering Construction Work Done $153.1 billion (excludes special trades services, c.$59 billion)

28 Australian Property Stock By type of building June 2009 Dwellings Rural $350 billion 65.4% Rural 6.2% Offices 7.0% Commercial $1605 billion (28.4%) 3.7% Other Bus. 3.1% Education Warehouses Transport etc 2.5% Factories 2.1% Entert. 2.1% Health 1.9% Hotels 1.8% Miscellaneous Dwellings $ 3695 billion (6.4%) $ 5.65 trillion (including land value) Source: ABS/IBISWorld

29 Building Construction By State % of total basis NSW Victoria Qld WA SA Tasmania ACT NT $ billions

30 Building Work Done In Victoria $ billion to September 2009 Constant F2008 prices $ billion Current prices ABS b

31 Completed Construction, Victoria $ billion, to September 2009 $ billion ABS /04/10

32 $ billion Non-Dwelling Building Work In Victoria

33 Victorian Building By Type % of total basis, by type of building Warehouses Transport Factories Accommodation Entertainment Aged Care Health Other Education Offices Retail /W Sale $ billions

34 Work In The Pipeline In Victoria To December 2009 $ billion ABS S IBISWorld: 14/04/10

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36 Australian Profitability by Cohorts Return on Shareholder Funds (after tax), Top 1250 businesses 5 years to F % > Best Practice (ROSF 22.2%) 42% > Average (ROSF 12.6%) 43% > Cost of capital (12.0%) 68% > Bond Rate (5.4%) 11% Losses Percent Source: IBISWorld 19/11/09

37 Australian Profitability By Major Industries Return on Shareholder Funds (after tax), Top 1250 businesses 5 years to F Percent Source: IBISWorld 22/12/09

38 What the Best Enterprises Are Doing 1. They stick to one business at a time and do not diversify 2. They aim to dominate some segment (s) of their market 3. They are forever innovative, valuing the business IP. 4. They outsource non-core activities to enable growth. 5. They don t own hard assets. 6. They have good and professional financial management. 7. They plan from the outside-in not the inside-out 8. They anticipate any new industry lifecycle changes. 9. They follow world best practice for their own type of business. 10. They develop strategic alliances. 11. They develop unique organisational cultures. 12. They value leadership first and management second.

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