State & Territory Perspectives Diana Mousina Economist mousind@cba.com.au Gareth Aird Economist gareth.aird@cba.com.au March 215 1
Summary 2
Summary 3
State Structure 4
State Structure STATE SHARES OF GDP (%, 213-14) % 1 INDUSTRY COMPOSITION OF GDP (% of GSP, 213-14) % 1 WA 16% QLD - 19% 8 8 Other Services Transport, Postal & Warehousing VIC - 22% SA - 6% TAS 2% 6 4 6 4 Utilities Retail & Wholesale Construction Manufacturing Mining - 31% ACT 2% NT 1% 2 2 Agri Vic QLD SA WA Tas NT ACT 5
State Growth GSP % (chain volumes) % 8 15/16 annual growth (f) 8. Index 14 13 STATE DEMAND (Sep 8 = 1) WA Index 14 13 6 6. 4 14/15 annual growth (f) 4. 12 11 VIC 12 11 2 2. 1 SA 1 VIC QLD SA WA TAS NT ACT AUST. QLD TAS 9 Sep-8 Sep-9 Sep-1 Sep-11 Sep-12 Sep-13 Sep-14 9 State spending fell in QLD, ACT, NT and (marginally) in QIV. VIC had the strongest growth over the quarter with solid rises across all of the components of demand (business investment, household consumption, government spending and dwelling investment). The increase in WA spending was driven by higher business and dwelling investment. spending was dragged lower by weak business investment. Residential dwelling construction also looked low compared to trends in building approvals. A pickup should be apparent in QI. We expect the stronger performing States to be and VIC over the next few years. LNG exports from QLD will boost Gross State Product significantly over 215/16. 6
Capital Expenditure 15 STATES: CAPEX (volume) WA 15 3 NON-MINING STATES: CAPEX (Volumes, quarterly) 4 Non-res build. const. Engineering 4 3 Qld VIC 1 1 2 VIC 2 5 Vic 5 1 SA SA 1 SA TAS TAS Sep-89 Sep-93 Sep-97 Sep-1 Sep-5 Sep-9 Sep-13 Mar- Mar-6 Mar-12 Sep-2 Sep-8 Sep-14 Mining capex is declining in WA and QLD at a faster rate than non-mining capex is picking up in the non-mining States. Across the non-mining States, non-residential building growth is trending higher and offsetting falls in engineering construction. Government infrastructure commitments (particularly on road and rail infrastructure projects) make up the majority of the engineering construction pipeline in the non-mining States. 7
Building Approvals 5 COMM. BLDG. APPROVALS (moving annual total) 5 1.6 INDUSTRIAL BLDG. APPR (moving annual total) QLD 1.6 5 OTHER# BLDG. APPR (moving annual total) #Accom, health, ed'n, aged & leisure 5 4 VIC 4 1.2 1.2 4 4 3 3 3 VIC 3 2 QLD 2.8 VIC.8 2 2 WA 1 SA Jun-1 Jun-4 Jun-7 Jun-1 Jun-13 1.4 SA WA. Jun-1 Jun-4 Jun-7 Jun-1 Jun-13.4. 1 QLD SA WA Jun-1 Jun-4 Jun-7 Jun-1 Jun-13 1 Trends in commercial building approvals have trended down over recent months. Industrial building approval trends are more positive in the large non-mining States. Other building approvals have been stronger. other building approvals have been boosted by some large health-related buildings. 8
Building Approvals ' 75 RESID. BLDG APPROVALS (mov. annual total) VIC ' 75 Residential approvals are running at or near record levels in most States and Territories. The increase in dwelling approvals over the past year has been most pronounced in VIC, QLD and. WA approvals have also grown steadily over the past year. 6 6 VIC remains leader in number of new dwellings constructed on annual basis. 45 QLD 45 In the small non-mining States, approval activity has lifted marginally in SA and TAS but remains weak in ACT (after previously elevated construction activity in 213). 3 3 NT approvals are a little higher over recent months in line with demand for housing from mining-related workers. WA 15 SA 15 ROA Jan- Jan-3 Jan-6 Jan-9 Jan-12 Jan-15 Total approvals growth should consolidate over 215. New dwelling construction will be well supported over 214 and 215 by demographics and low interest rates. Housing starts should be near 197k in 214 and a similar level in 215. Risks of an oversupply on a national basis are low. But there is a risk of saturation in Victoria. 9
Labour Market 16 's JOBS CHANGE PAST YEAR (year to Feb.215, 's) Total = 151k Full-time = 84k Part-time = 67k UNEMPLOYMENT BY STATE % % 9 9 Tas SA 7 7 11 Part-time Qld Vic 6 6 6 1 4 WA 4 Full-time -4 VIC QLD SA WA TAS AUST 2 Jun-9 Aug-11 Oct-13 Oct-9 Dec-11 Feb-14 2 Jobs growth over past year has been concentrated in, VIC and WA. Unemployment rate trending higher in most States and Territories. Exceptions are VIC and TAS. full-time jobs growth accounted for 46% of national full-time jobs growth. Higher full-time jobs growth in (relative to the other States) is positive for consumer spending. Lowest unemployment rate remains in WA despite resource-related job losses. 1
Consumer Sentiment Index 14 STATE SENTIMENT* Source: WBC-Melbourne Institute Index 14 Sentiment lifted post-rate cut in February but fell back in March and remains below the critical neutral level of 1. This is despite the drop in petrol prices which normally boosts sentiment. 12 WA VIC 12 Sentiment remains the strongest in. One of the key factors keeping consumer confidence low is elevated unemployment concerns. Strong dwelling price growth in and to a lesser extent VIC is supporting consumer sentiment. 1 QLD 1 Sentiment is lowest in WA as mining growth continues to decline. SA *Smoothed 8 Jan-28 Oct-29 Jul-211 Apr-213 Jan-215 8 11
Retail Trade % (trend, annual % change) % 12 12 9 6 3 RETAIL TRADE Rest of Australia Mining States VIC 9 6 3 National National retail retail sales trade growth growth is is being being driven driven by by the the large large nonmining nonmining States. States. Annual growth rates have slowed in recent months. and VIC have had the largest rises in dwelling prices across and the VIC nation. have Rising had the wealth largest positions rises in tend dwelling to fuel prices an increase across the in nation. consumer Rising spending. wealth positions tend to fuel an increase in consumer spending. Income growth in the mining States has declined which has had Retail an sales impact growth on retail in the sales. mining As employment States has declined growth but slows now even looks further to be stabilising in the mining at a States, subdued retail pace. sales Slowing spending income will and be impacted. employment growth will continue to keep retail spending at soft levels in the mining States. Large rises in retail spending have occurred in cafes, restaurants, Large rises in catering retail spending services have takeaway occurred food in cafes, services and also restaurants, in categories catering related services to home & takeaway improvement food services spending. and Home-related also in categories spending related tends to home to increase improvement when i) spending. there is a significant Home-related increase spending in dwelling tends to prices; increase and when: ii) there i) there is large is a increase significant in increase new dwelling in dwelling construction. prices; and ii) there is a large increase in new dwelling construction. -3 Jul-6 Nov-7 Mar-9 Jul-1 Nov-11 Mar-13 Jul-14-3 12
Housing Lending LOAN APPROVALS BY STATE Index (owner-occupied number, July '8 = 1) Index 145 145 New housing loan demand has been largely driven by investor interest, particularly in and VIC. Momentum in owner-occupied lending has slowed over the past six months. First-home buyer lending across the States remains low. But some FHB s appear to be hidden in the investor category. 125 Vic WA 15 SA 85 Qld Tas 65 Jul-8 Jul-11 Jul-14 Jul-1 Jul-13 125 15 85 65 The interest rate cut in February has again fuelled activity in the housing market. Loan approvals growth should remain elevated over the first half of the year. But, strong house price growth (particularly in and VIC) and falling rental yields should provides a limit for upside growth in lending to owner-occupiers and investors. APRA is reviewing lending practices that authorised deposit taking institutions are undertaking. APRA will be focussing on three areas: i) higher risk mortgage lending (e.g. high loan-to-valuation and high loan-to-income loans); ii) strong lending growth to property investors (portfolio growth materially above 1% will be a risk indicator); and iii) loan affordability test for new borrowers (APRA would prefer an interest rate buffer of at least 2% above the loan product rate and a floor lending rate of at least 7%). 13
Housing Lending INVESTOR LOANS (moving annual total) Majority of larger States are currently in a solid upward trend for investor lending. 6 6 Investors continue to favour. This has contributed to a big increase in property prices in Sydney. Low interest rates and the hunt for yield are driving lending momentum to investors. 4 2 VIC QLD WA 4 2 The impacts of APRA oversight on investor lending is uncertain. APRA is targeting investor portfolio growth of 1%pa (current investor credit growth) across the financial institutions. Record investor lending over 214 pushed investor credit growth to this level. Overall, historically low interest rates and the expectation of further house price appreciation has seen investor appetite for housing credit rise solidly. SA Dec-1 Dec-4 Dec-7 Dec-1 Dec-13 14
Dwelling Prices Index 85 7 DWELLING PRICES Melbourne Sydney Index 85 7 Dwelling price gains have been concentrated in Sydney and Melbourne, reflecting high levels of investor interest. Price trends in smaller capitals and regional areas are more restrained. Lower affordability and lower rental yields will ultimately weigh on house price growth. Further interest rate cuts would push in the other direction. Perth 55 55 Brisbane 4 Adelaide Regional 4 Source: CoreLogic RP Data 25 Jan-6 Jan-8 Jan-1 Jan-12 Jan-14 25 15
Demographics %pa 4 3 ABS311 POPULATION GROWTH (annual % change) WA %pa 4 3 's 15 1 INTERSTATE MIGRATION (annual totals) Qld 's 15 1 2 Qld 2 5 Vic WA 5 1 Vic 1 SA SA -5-5 Tas Jun- Jun-2 Jun-4 Jun-6 Jun-8 Jun-1 Jun-12 Jun-14-1 Mar- Mar-3 Mar-6 Mar-9 Mar-12-1 Population growth rates are coming off peak levels in the mining States. Interstate migration flows show a weakening in migration to WA while the net outflow from has slowed. 16
Trade 14 STATE EXPORTS & IMPORTS (Volumes, annual, original) EXPORTS IMPORTS 14 Growth in export volumes will be an important driver of GDP growth over the next few years. A lower AUD is acting as an income buffer that supports export receipts. WA export volumes will continue to grow as further iron ore and LNG capacity comes online. 15 7 WA 15 7 QLD exports will be supported by solid levels of coal volume exports. Lower prices will partially offset higher volumes. QLD exports will receive a significant boost around 215-16 when LNG projects are completed and the export phase begins. LNG exports are set to triple over the next three years. 35 Qld Vic 35 Import growth is past the peak in WA and QLD given lower mining capex (which is import intensive). Qld Vic WA Jun-199 Jun-25 Jun-1994 Jun-29 17
Public Spending 25 PUBLIC SPENDING (Consumption & Investment, Volume) 25 Across the States, there has been a distinct flattening in total public sector spending over the past five years compared to the previous ten. 15 VIC Asset Transfers 15 Low public spending growth means that the sector is not adding to State growth. The public sector in each State is around 2% of activity. So flat spending is a significant drag on growth. Total public spending expected to remain subdued while the Federal Government targets a path back to a Budget surplus. QLD WA 5 5 Mar- Mar-3 Mar-6 Mar-9 Mar-12 Mar-15 18
Inflation %pa Syd Melb Bris Adel Perth CAPITAL CITY INFLATION (QIV 214) 1 2 3 Australia Inflation is well contained across all the States and price growth has come off significantly because of the drop in petrol prices. Low petrol prices will keep headline inflation low over the near-term. Some offset will be provided by the falling AUD boosting import prices. Housing costs remain elevated in Sydney and Brisbane. We see the key measures of underlying inflation remaining within the RBA s 2-3% target band for the next few quarters. Hob Darwin Canb 19
Wage Costs Vic Qld SA WA Tas NT ACT Aus %pa WAGE PRICE INDEX (% annual growth, QIV) Public Private National Average. 1. 2. 3. 4. National wages growth is running at 2.5%pa and outperformed headline QIV CPI (1.7%pa). NT wages are above the national average thanks to the increase in the demand of labour associated with the LNG activity in the State. Large decline in WA private wages growth a result of lower demand for mining related employment. WA wages growth will continue to trend down as unemployment rises. Spare capacity in the labour market will keep wages growth low. We expect nominal wages growth to remain under 3% in the near-term given soft conditions in the labour market nationally. We see the unemployment rate stabilising midyear before declining over 216. As employment growth lifts, wages growth should start to increase over 216. 2
The Territories Index 15 FINAL DEMAND (Sep 8 = 1) Index 15 4. STATE BUS. INVESTMENT (Volume) 15 14 NT 14 NT (lhs) 3. 88 13 13 AUS (rhs) 12 11 ACT AUS 12 11 2. 1. ACT (rhs) 7 53 1 1 9 Sep-8 Mar-1 Sep-11 Mar-13 Sep-14 9. 35 Mar- Mar-3 Mar-6 Mar-9 Mar-12 Mar-15 NT spending continues to be supported by high levels of resource investment (Ichthys LNG project). Spending will remain at an elevated level until a 216 while construction activity continues. High levels of business investment are flowing through to other sectors. ACT growth remains low. Housing construction is trending down and will detract from growth in 215. 21
State Specialisation Ratios and VIC 1.6 SPECIALISATION RATIOS (213-14) % 1.6 1.4 VIC SPECIALISATION RATIOS (213-14) 1.4 1.2 1.2 1.1 1.1.8.8.7.7.4.4.4.4. Mining Agriculture Construction Transport Government Health Retail Manufacturing Education Wholesale Prof services Other services Communications Fin & Ins.. Mining Construction Government Other services Transport Health Agriculture Wholesale Manufacturing Education Retail Fin & Ins Prof services Communications. and Victoria the two most diversified State economies in Australia. Both States have a specialisation in financial & insurance, communication and professional services meaning that both States benefit most from a low interest rate environment. 22
State Specialisation Ratios QLD & WA 1.4 QLD SPECIALISATION RATIOS (213-14) % 1.4 3.6 WA SPECIALISATION RATIOS (213-14) 3.6 1.1 1.1 2.4 2.4.7.7.4.4 1.2 1.2. Communications Fin & Ins Prof services Education Agriculture Other services Manufacturing Health Retail Government Mining Transport Wholesale Construction.. Fin & Ins Communications Government Education Wholesale Retail Health Manufacturing Other services Prof services Transport Agriculture Construction Mining. Both Qld and WA have a high State specialisation towards construction. The importance of the mining industry to the WA economy is reflected in a specialisation ratio of 3.5. 23
State Specialisation Ratios SA & TAS 2.5 SA SPECIALISATION RATIOS (213-14) 2.5 3.6 TAS SPECIALISATION RATIOS (213-14) 3.6 2. 2. 1.5 1.5 2.4 2.4 1. 1..5.5 1.2 1.2. Mining Communications Fin & Ins Construction Prof services Transport Other services Wholesale Retail Education Government Manufacturing Health Agriculture.. Agriculture Education Retail Health Government Transport Manufacturing Other services Communications Wholesale Construction Fin & Ins Prof services Mining. Tas has the highest exposure to the agricultural industry amongst the States. The sector has accounted for around 8½% of the State s income over the past few years. The forestry industry, in particular, is a solid contributor to the local economy. SA, with sizeable wine, wheat, barley and forestry industries is also more reliant on the agricultural sector relative to the rest of Australia. The industry is worth around 6% of the State s income. 24
State Specialisation Ratios ACT & NT ACT SPECIALISATION RATIOS (213-14) NT SPECIALISATION RATIOS (213-14) 6. 6. 2.5 2.5 4. 4. 1.3 1.3 2. 2.... Mining Agriculture Manufacturing Wholesale Fin & Ins Transport Retail Communications Health Other services Construction Education Prof services Government. Financial and insurance Wholesale Communications Professional services Manufacturing Retail Education Agriculture Health Transport Other services Government Mining Construction Smaller jurisdictions tend to have a larger share of the workforce employed in public administration compared to bigger jurisdictions, essentially due to diseconomies of scale. The ACT economy is highly dependent on public sector employment. As the national capital, the public sector employs a big chunk of the workforce and accounts for around a third of the total income generated in the ACT. It means that ACT economic growth outcomes are very much influenced by the size of the public sector workforce. The construction and mining sectors are very important to the NT economy. 25
Forecasts Gross State Product 213/14 214/15 215/16 (a) (f) (f) 2.1 2.7 3.3 VIC 1.7 2.3 3. QLD 2.3 2.4 4.2 GSP % (by state, chain volumes) % 16 32. 12 share of economy (rhs) 16. SA 1.3 2. 2.5 WA 5.5 2.8 2.6 TAS 1.2 2.1 2. NT 6.5 5.5 3. 8 4 13/14 annual growth (lhs) 14/15 annual growth (f) (lhs). -16. ACT.7 2. 2.5 AUST 2.5 2.5 3.2 VIC QLD SA WA TAS NT ACT AUST -32. 26
Forecasts Employment 213/14 214/15 215/16 (a) (f) (f).6 1.1 2.2 Employment % (by state) % 12 32. VIC.7 1.4 2.1 share of economy (rhs) QLD 1.4 1.4 2.3 9 16. SA -1.2.1 1.4 WA 1.1 2.3 1.4 TAS -.4 3.4 1.1 NT 4.5 1.7 2. 6 3 14/15 annual growth (f) (lhs) 15/16 annual growth (f) (lhs). -16. ACT -.2 -.4 1.2 AUST.8 1.3 2. VIC QLD SA WA TAS NT ACT AUST -32. 27
Forecasts Unemployment Rate 213/14 214/15 215/16 (a) (f) (f) Unemployment Rate % (by state, annual average) % 9 9 5.7 6.1 5.7 VIC 6.2 6.7 6.1 QLD 6.1 6. 6.1 214/15 (f) 215/16 (f) SA 6.7 6.9 6.7 WA 4.8 5.4 5.6 6 6 TAS 7.7 6.8 7.1 NT 4.5 4.2 4.8 ACT 3.9 4.8 4.5 AUST 5.8 6.2 5.9 3 VIC QLD SA WA TAS NT ACT AUST 3 28
Forecasts Wage Price Index 213/14 214/15 215/16 (a) (f) (f) 2.5 2.4 3.1 Wages % (by state) $ 1 Average Weekly Earnings (rhs) 1,8 VIC 2.7 2.6 3.1 8 1,35 QLD 2.6 2.5 3.1 SA 3.3 2.8 2.6 6 9 WA 2.8 2.3 3.1 TAS 2.3 2.3 2.4 NT 2.7 2.7 3. 4 14/15 WPI %pa (f) (lhs) 15/16 WPI %pa (f) (lhs) 45 ACT 2.4 1.9 2.7 AUST 2.6 2.5 3. 2 VIC QLD SA WA TAS NT ACTAUST 29
Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra AUST Forecasts Consumer Price Index 213/14 214/15 215/16 (a) (f) (f) Sydney 2.6 2.3 3. Melbourne 2.8 2.3 3.1 Brisbane 2.8 2.5 3.1 CPI % (by capital city, annual average) % 4. 4. 3. 214/15 (a) 215/16 (f) 3. Adelaide 2.6 2.3 2.6 Perth 3. 2.4 2.6 2. 2. Hobart 2.5 2. 2.5 Darwin 3.7 2.8 2.9 1. 1. Canberra 2.2 2.3 2.5 AUST 2.7 2.3 3. 3
Important Disclosures & Disclaimer The information contained in this document is made available for persons who are wholesale clients, sophisticated investors or professional investors as defined in the Corporations Act 21. This document is not to be construed as a solicitation or an offer to buy any securities or financial instruments. This document has been prepared without taking account of the objectives, financial situation (including the capacity to bear loss), knowledge, experience or needs of any specific person who may receive this article. All recipients should, before acting on the information in this report, consider the appropriateness and suitability of the information, having regard to their own objectives, financial situation and needs, and, if necessary seek the appropriate professional or financial advice regarding the content of this report. The information does not purport to be a complete statement or summary of a transaction. Financial markets products have an element of risk. The level of risk varies depending on the product s specific attributes and how it is used. Potential investors should note that the product discussed is a sophisticated financial product which involves dealing in derivatives. Unless you are familiar with products of this type, this product may not be suitable for you. The Bank will enter into transactions on the understanding that the customer has: made his/her own independent decision to enter into the transaction; determined that the transaction is appropriate; ensured he/she has the knowledge to evaluate and capacity to accept the terms, conditions and risks; and is not relying on any communication from Commonwealth Bank as advice. We believe that the information in this document is correct and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its compilation, but no representation or warranty, either expressed or implied, is made or provided as to accuracy, reliability or completeness of any statement made in this article. Any opinions, conclusions or recommendations set forth in this document are subject to change without notice and may differ or be contrary to the opinions, conclusions or recommendations expressed elsewhere by the Bank or the wider Commonwealth Bank of Australia Group of Companies. We are under no obligation to, and do not, update or keep current the information contained in this report. Neither the Bank nor any of its subsidiaries accept liability for any loss or damage arising out of the use of all or any part of this article. Any valuations, projections and forecasts contained are based on a number of assumptions and estimates and are subject to contingencies and uncertainties. Different assumptions and estimates could result in materially different results. The Bank does not represent or warrant that any of these valuations, projections or forecasts, or any of the underlying assumptions or estimates, will be met. Past performance is not a reliable indicator of future performance. The Bank has provided, provides, or seeks to provide, investment banking, capital markets and/or other services, including financial services, to the companies described in the article and their associates. All material presented in this article, unless specifically indicated otherwise, is under copyright to the Bank. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior written permission of the Bank. In the case of certain products, the Bank or one of its related bodies corporate is or may be the only market maker. The Bank, its agents, associates and clients have or have had long or short positions in the securities or other financial instruments referred to herein, and may at any time make purchases and/or sales in such interests or securities as principal or agent, including selling to or buying from clients on a principal basis and may engage in transactions in a manner inconsistent with this article. Unless agreed separately, we do not charge any fees for any information provided in this presentation. You may be charged fees in relation to the financial products or other services the Bank provides, these are set out in the relevant Financial Services Guide (FSG) and relevant Product Disclosure Statements (PDS). Our employees receive a salary and do not receive any commissions or fees. However, they may be eligible for a bonus payment from us based on a number of factors relating to their overall performance during the year. These factors include the level of revenue they generate, meeting client service standards and reaching individual sales portfolio targets. Our employees may also receive benefits such as tickets to sporting and cultural events, corporate promotional merchandise and other similar benefits. If you have a complaint, the Bank s dispute resolution process can be accessed in Australia on phone number 132221 or internationally 61 2 98417. Produced by Commonwealth Bank of Australia ABN 48 123 123 124 31
Important Disclosures & Disclaimer The information contained in this document is made available for persons who are wholesale clients, sophisticated investors or professional investors as defined in the Corporations Act 21. This document is not to be construed as a solicitation or an offer to buy any securities or financial instruments. This document has been prepared without taking account of the objectives, financial situation (including the capacity to bear loss), knowledge, experience or needs of any specific person who may receive this article. All recipients should, before acting on the information in this report, consider the appropriateness and suitability of the information, having regard to their own objectives, financial situation and needs, and, if necessary seek the appropriate professional or financial advice regarding the content of this report. The information does not purport to be a complete statement or summary of a transaction. Financial markets products have an element of risk. The level of risk varies depending on the product s specific attributes and how it is used. Potential investors should note that the product discussed is a sophisticated financial product which involves dealing in derivatives. Unless you are familiar with products of this type, this product may not be suitable for you. The Bank will enter into transactions on the understanding that the customer has: made his/her own independent decision to enter into the transaction; determined that the transaction is appropriate; ensured he/she has the knowledge to evaluate and capacity to accept the terms, conditions and risks; and is not relying on any communication from Commonwealth Bank as advice. We believe that the information in this document is correct and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its compilation, but no representation or warranty, either expressed or implied, is made or provided as to accuracy, reliability or completeness of any statement made in this article. Any opinions, conclusions or recommendations set forth in this document are subject to change without notice and may differ or be contrary to the opinions, conclusions or recommendations expressed elsewhere by the Bank or the wider Commonwealth Bank of Australia Group of Companies. We are under no obligation to, and do not, update or keep current the information contained in this report. Neither the Bank nor any of its subsidiaries accept liability for any loss or damage arising out of the use of all or any part of this article. Any valuations, projections and forecasts contained are based on a number of assumptions and estimates and are subject to contingencies and uncertainties. Different assumptions and estimates could result in materially different results. The Bank does not represent or warrant that any of these valuations, projections or forecasts, or any of the underlying assumptions or estimates, will be met. Past performance is not a reliable indicator of future performance. The Bank has provided, provides, or seeks to provide, investment banking, capital markets and/or other services, including financial services, to the companies described in the article and their associates. All material presented in this article, unless specifically indicated otherwise, is under copyright to the Bank. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior written permission of the Bank. In the case of certain products, the Bank or one of its related bodies corporate is or may be the only market maker. The Bank, its agents, associates and clients have or have had long or short positions in the securities or other financial instruments referred to herein, and may at any time make purchases and/or sales in such interests or securities as principal or agent, including selling to or buying from clients on a principal basis and may engage in transactions in a manner inconsistent with this article. Unless agreed separately, we do not charge any fees for any information provided in this presentation. You may be charged fees in relation to the financial products or other services the Bank provides, these are set out in the relevant Financial Services Guide (FSG) and relevant Product Disclosure Statements (PDS). Our employees receive a salary and do not receive any commissions or fees. However, they may be eligible for a bonus payment from us based on a number of factors relating to their overall performance during the year. These factors include the level of revenue they generate, meeting client service standards and reaching individual sales portfolio targets. Our employees may also receive benefits such as tickets to sporting and cultural events, corporate promotional merchandise and other similar benefits. If you have a complaint, the Bank s dispute resolution process can be accessed in Australia on phone number 132221 or internationally 61 2 98417. Produced by Commonwealth Bank of Australia ABN 48 123 123 124 32
In the UK and Europe : This document is made available in the UK and Europe only for persons who are Eligible Counterparties or Professional Clients, and not Retail Clients as defined by Financial Conduct Authority rules. The Commonwealth Bank of Australia and CBA Europe Ltd are both registered in England (No. BR25 and 568723 respectively). Commonwealth Bank of Australia: Authorised and regulated by the Australian Prudential Regulation Authority. Authorised by the Prudential Regulation Authority.Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. CBA Europe Ltd: Authorised and regulated by the Financial Conduct Authority In Singapore: The information in this brochure is made available only for persons who are Accredited Investors or Expert Investor in terms of the Singapore Securities and Futures Act. It has not been prepared for, and must not be distributed to or replicated in any form, to anyone who is not an Accredited Investor or Expert Investor. If you are an Accredited Investor or Expert Investor as defined in Regulation 2(1) of the Financial Advisers Regulations ("FAR"), the Bank is obliged to disclose to you that in the provision of any financial advisory services to you, we are exempted under Regulations 33, 34 and 35 of the FAR from complying with the business conduct provisions of sections 25 (Obligation to disclose product information to clients), 27 (Recommendations by licensees) and 36 (Disclosure of interests in securities) respectively, of the Financial Advisers Act ("FAA"). In Japan: This document is made available only for institutional customers. Commonwealth Bank of Australia, Tokyo Branch is a licensed banking business authorized by Japan Financial Services Agency. In Hong Kong: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. The provision of this document to any person in the Hong Kong does not constitute an offer of securities to that person or an invitation to that person to acquire, apply, or subscribe, for the issue of, or purchase, securities unless the recipient is a person to whom an offer of securities may be made in Hong Kong without the need for a prospectus under section 2 and the Seventeenth Schedule of the Companies Ordinance (Cap. 32 of the Laws of Hong Kong) ( Companies Ordinance ) pursuant to the exemptions for offers in respect of which the minimum consideration payable by any person is not less than HK$5, or its equivalent in another currency. Neither this document nor any part of it is, and under no circumstances are they to be construed as, a prospectus (as defined in the Companies Ordinance) or an advertisement of securities in Hong Kong. The products have not been, nor will they be, qualified for sale to the public under applicable Hong Kong securities laws except on a basis that is exempt from the prospectus requirements of those securities laws. Minimum Investment Amount for Hong Kong Investors: HK$5, 33
In the USA: The Bank is authorized to maintain a Federal branch by the Office of the Comptroller of the Currency. This document is made available for informational purposes only. The products described herein are not available to retail investors. NONE OF THE PRODUCTS DESCRIBED ARE DEPOSITS THAT ARE COVERED BY FDIC INSURANCE. This product is not suitable for investment by counterparties that are not eligible contract participants as defined in the U.S. Commodity Exchange Act ( CEA ) and the regulations adopted thereunder; or (ii) entities that have any investors who are not eligible contract participants. Each hedge fund or other investment vehicle that purchases the products must be operated by a registered commodity pool operator as defined under the CEA and the regulations adopted thereunder or a person who has qualified as being exempt from such registration requirement. CBA cannot execute swaps with any US person unless our counterparty has adhered to the ISDA Dodd Frank protocol. This report was prepared, approved and published by Global Markets Research, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 (the Bank ) and is distributed in the United States by the Bank s New York Branch and its Houston Loan Production Office. If you would like to speak to someone regarding securities related products, please contact Commonwealth Australia Securities LLC (the U.S. Broker Dealer ), a broker dealer registered under the U.S. Securities Exchange Act of 1934 (the Exchange Act ) and a member of the Financial Industry Regulatory Authority ( FINRA ) at 1 (212) 336-7737. The information contained herein is not intended to be an exhaustive discussion of the strategies or concepts mentioned herein or tax or legal advice. Investments and strategies are discussed in this report only in general terms and not with respect to any particular security or securities transaction, and any specific investments may entail significant risks including exchange rate risk, interest rate risk, credit risk and prepayment risk among others. There also may be risks relating to lack of liquidity, volatility of returns and lack of certain valuation and pricing information. International investing entails risks that may be presented by economic uncertainties of foreign countries as well as the risk of currency fluctuations. Investors interested in the strategies or concepts described in this report should consult their tax, legal or other adviser, as appropriate. This report is not intended to provide information on specific securities. The Bank s New York Branch and its Houston Loan Production Office provides its clients access to various products and services available through the Bank and its affiliates. In the United States, U.S. brokerage products and services are provided solely by or through the U.S. Broker-Dealer. The U.S. Broker-Dealer is a wholly-owned, but nonguaranteed, subsidiary of the Bank, organized under the laws of the State of Delaware, U.S., with limited liability. The U.S. Broker-Dealer is not authorized to engage in the underwriting of securities and does not make markets or otherwise engage in any trading in the securities of the subject companies described in our research reports. 34