Investor Presentaiton
NZ REGIONAL OUTLOOK
• The New Zealand economy remains on a solid footing. Real GDP rose by
3.6% over the year to the June quarter 2016; its fastest pace since late
2014
• Factors supporting the economic growth include: strong population growth
due to high net inward migration, construction, tourism, robust
employment and investment trends, along with low interest rates
• Constraints on growth are: emerging capacity constraints domestically,
mixed commodity export prices, the robust NZ dollar and tepid
international conditions
• Dairy prices remain far from strong. However they have rebounded
enough, since the recent low in April 2016, for Fonterra to increase its
forecast of the 2016/17 farmgate milk price by $1 to $5.25 per kg of milk
solids. This is now slightly above break-even for most dairy farmers. Non-
dairy commodity prices generally remain mixed-to-strong
• High house price inflation is now broadening beyond Auckland
The labour market continues to firm, although nominal wage growth
remains moderate
The Reserve Bank of New Zealand cut its OCR in August 2016 to a
historically low 2.0%, while indicating that further policy easing will be
required to meet its inflation target
• Credit growth was 7.5% yoy in August, around the level it has been since
the start of 2016. Strength is most evident in housing credit, although new
loan-to-value restrictions are expected to slow growth. Agriculture and
consumer credit growth has been slowing
ECONOMIC INDICATORS (%)
CY14
CY15
CY16(f) CY17(f) CY18(f)
GDP growth1
3.8
2.5
3.4
3.1
1.9
Unemployment²
5.5
5.0
5.0
5.1
5.3
Inflation³
Cash rate²
SYSTEM GROWTH (%)4
0.8
0.1
10
1.3
1.5
1.9
3.5
2.5
1.75
1.5
2.5
FY14
FY15
FY16(f) FY17(f) FY18(f)
Housing
5.4
5.3
8.2
7.6
6.1
Personal
4.6
6.0
2.9
3.1
4.3
Business
3.4
6.0
6.8
6.0
5.6
Total lending
4.6
5.6
7.4
6.8
5.8
(1)
(2)
As at December quarter
(3)
Average for year ended December quarter on average of previous year
December quarter on December quarter of previous year
(4)
Average for year-ended September (bank fiscal year end) on average of previous year
114
Household retail deposits
8.8
10.5
9.8
7.0
6.7
AUSTRALIAN AND NZ ECONOMIES CONTINUE TO PERFORM WELL
GDP (INDEXED)1
AUSTRALIA AND NZ UNEMPLOYMENT RATE²
(%)
Q4 2005 100
135
130
125
120
7.0
Australia
6.5
New Zealand
6.0
New
Zealand
5.5
Australia
115
United
States
5.0
110
105
100
95
Eurozone
4.5
Japan
4.0
3.5
National
Australia
Bank
3.0
90
Mar 06
Mar 08
Mar 10
Mar 12
Mar 14
Mar 16
Q1 2006
Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016
(1)
Henderson centred seven period moving average. Source: NAB
(2)
Source: NAB
115
National
Australia
BankView entire presentation