Economic and Financial Market Outlook. 25 June 2012 Chris Murphy with Dinar Prihardini

Transcription

1 Economic and Financial Market Outlook 25 June 2012 Chris Murphy with Dinar Prihardini

2 The information in this presentation is of a general nature and does not represent advice. Independent Economics does not provide investment advice under any circumstances. The forecasts in this presentation are subject to unavoidable statistical variation. While all care has been taken to ensure that the statistical variation is kept to a minimum, care should be taken whenever using this information. This presentation only takes into account information available to Independent Economics up to the date of this presentation and its findings may be affected by new information.

3 Outline The economic outlook: Europe under financial pressure; Australian economy in a soft patch Financial markets: will the stock market rebound? The personal income tax burden: personal income tax cuts as compensation for carbon tax?

4 The economic outlook

5 Euro area credit quality has deteriorated Source: International Monetary Fund, Bloomberg and Merrill Lynch

6 Australia Greece UK US Japan Italy France Germany Spain Ireland Portugal Adv Eco Pressure on public balance sheets 150 Net government debt in 2012 (% GDP) Source: International Monetary Fund (April 2012) Note: Greece figure is for 2010

7 March quarter false dawn, but 2013 looks good 8% 6% GDP growth, % rolling years 4% 2% 0% -2% -4% history forecast 2006Q2 2007Q4 2009Q2 2010Q4 2012Q2 2013Q4 GDPW GDPA GDPW=world GDP GDPA=Australian GDP Source: Independent Short-term Forecasting Model

8 Softness in growth has contained inflation history forecast 2006Q2 2007Q4 2009Q2 2010Q4 2012Q2 2013Q unemployment (left) inflation (right) Source: Independent Short-term Forecasting Model

9 making room for two more interest rate cuts day bill rate, % p.a history forecast Q2 2007Q4 2009Q2 2010Q4 2012Q2 2013Q4 Source: Independent Short-term Forecasting Model

10 Financial markets

11 Strong commodity prices keep AUD near parity $US/$A history forecast Q2 2007Q4 2009Q2 2010Q4 2012Q2 2013Q4 Source: Independent Short-term Forecasting Model

12 Stock rebound in early history forecast Q2 2007Q4 2009Q2 2010Q4 2012Q2 2013Q4 ASX 200 (left) MSCI World ($US, right) Source: Independent Short-term Forecasting Model

13 The personal income tax burden

14 Part of the story. Tripling of the tax-free threshold Source: Tax Reform Road Map, Australian Government, 2012/13 Budget

15 and the rest of the story Tax-free threshold tripled, but offset by reduction in the Low Income Tax Offset; the net tax cut is relatively small This small net tax cut said to compensate low and middle income earners for the introduction of the Carbon Tax But cancelled out by bracket creep from inflation for full-time workers on average earnings, tax rate unchanged from 2011/12 to 2012/13 at 22.2% beyond 2012/13, bracket creep pushes average tax rates higher Bracket creep plays a key role in the projected surpluses

16 average tax rate rises for the average worker Average tax rate 25% 24% 23% 22% 21% 20% 2000/ / / / / /16 FT average worker all taxpayers Sources: Independent Tax Calculator, ATO Taxation Statistics

17 Summing Up March quarter national accounts a false dawn Solid growth forecast from 2013 Annual GDP growth (rounded): 2010/11 2% 2011/12 3 ¼% 2012/13 2 ½% 2013/14 3 ½% Unemployment to remain around 5% Underlying inflation at lower end of RBA s 2-3% range Leaves room for two more cuts in cash rate to 3% High commodity prices to keep $A around parity with $US Share market appears under-valued and will be supported by the sustained economic recovery to come

18 Chris Murphy Director Independent Economics Dinar Prihardini Senior Economist Independent Economics