Australian & New Zealand Weekly

Week beginning 9 February

RBA: more to do, then on hold for longer.
Westpac-MI Consumer Sentiment: will jumbo stimulus offset growth gloom?
Australian data: housing finance and labour force figures due.
New Zealand data: house prices and retail sales.
US data: trade deficit, retail sales and consumer sentiment.
US Fedspeak: Bernanke testimony, Fisher, Dudley, Evans.
Key economic & financial forecasts.

Australia: RBA - More to Do, then On Hold for Longer

As we predicted last week, the Reserve Bank cut the overnight cash rate by a further 100bp to 3.25% on February 2. This is the first move since the last Board meeting on 2 December, and hence reflects the Bank's assessment of the global growth environment over the last two months. It appears that it has been surprised by the severity of the downturn in the global economy over that period. For example, in the December 2 Statement, the Governor referred to "the likelihood of below-trend growth in the global economy". In the February Statement, he refers to "a significant deterioration in world economic conditions" and "a significant downturn in demand around the world".

He repeats the assessment that Australia has been less affected than in other advanced economies, and points to the strength of the Australian financial system, anticipating that large interest rate cuts and expansionary fiscal policy, will help cushion the Australian economy.

The expected timing of any global recovery is decidedly vague, with the Statement referring to "global recovery over time. But the near-term outlook for the global economy is the weakest for many years.”

The Statement specifically refers to the latest $42bn fiscal stimulus package from the Federal Government. Some may interpret that as implying that without the package, the cut would have been larger. However, we prefer the interpretation that the Governor is only informing the market that this policy decision was made with full knowledge of the fiscal package - clarifying a potential source of uncertainty, rather than implying a different policy outcome.

The final paragraph notes that significant stimulus has been given to the Australian economy. However, given the decision to make another large cut was almost entirely due to the deteriorating world economic outlook, we think that there are more rate cuts to come.

In last week's note, we forecast that the low point for the policy cycle will be an overnight cash rate of 2.00%, to be achieved in the June quarter. The choice of 2% is driven off the assessment of the likely effectiveness of pushing cash rates even lower, given the importance of the links between the cash rate and private sector interest rates. As interest rates fall so banks' margins are squeezed since the very low interest rate deposit products lose their relative value. Unlike the US and UK banks Australian banks have been very responsive to easing monetary policy and the reductions in loan rates by the banks are the key way in which monetary policy affects the economy. The Reserve Bank would need to make an assessment as to how far the banks could be expected to squeeze margins in an effort to maintain the effectiveness of monetary policy. And we expect that around 2% would be seen as that barrier.

Given our reasonable but yet to be fully researched view that 2% would mark the level below which monetary policy would lose its effectiveness, the debate is how quickly would the Reserve Bank move to that 2% target. We disagree with the view that the Bank will defer further action until it has the time to assess the impact of its 400 basis point action so far. That view misinterprets the objective of current policy.

Monetary policy is currently being used to buffer the Australian economy against the current global turmoil. A rethink would only be made if there was some perception that the turmoil was easing. In fact, of course, it has intensified in the Asian region. Our interpretation of the Chinese data is that industrial production and electricity demand in China has actually contracted in the last months of 2008 in contrast with the accepted 15-20% annual growth rates. The rest of Asia which is leveraged to the US and European demand as well as interregional trade is collapsing.

Real GDP fell by an annualised rate of 21% in South Korea and 17% in Singapore. Japan's exports dropped by 35% in 2009 and Taiwan's were down by 42% while industrial production fell by 32%.

The message is clear for the Reserve Bank - ease as much as possible as quickly as possible to maximise Australia's chances of weathering the storm.

Consequently, we anticipate a 75bp cut following the March Board meeting, and a final 50bp cut in April.

In last week's note we discussed our big picture view of the current world environment. We characterise it as a balance sheet recession for the corporate and financial sectors while a number of household sectors - US, Europe (ex Germany), UK - are also now focussed on repairing balance sheets. Those countries - Japan, Germany, China, most of the rest of Asia - have now found their growth models which were based around leveraging growth off external demand are now failing as that external demand collapses.

We confidently expect the Australian corporate sector to focus on balance sheet repair rather than growth and a key question for Australia is whether the household sector also moves toward reducing debt rather than spending. Recent evidence from housing credit growth, the disappointing estimated $700m spent in December out of the $8.7bn fiscal package, and the sharp jump in debt repayments in the September quarter, are pointing to a sharp move by Australians to raise their savings rates. Lower interest rates and fiscal largesse will assist the household sector in that endeavour but it will mean that economic growth remains weaker for longer.

That does not mean that the latest $42bn fiscal stimulus package which has been proposed by the government will be ineffective. The $28bn infrastructure expenditure package will be a direct complement to domestic demand filling part of the gap created by the expected contraction in the private sector. The $12.2bn in direct payments are likely to be largely saved in the first round. However they will allow the household sector to feel more secure about their balance sheets opening up the possibility of spending in future. Equally the payments are likely to contain any future reduction in spending associated with concerns about debt levels.

However, balance sheet repair is a long process. With that force being the dominant global force, central banks are unlikely to detect any need to start withdrawing their stimulus before the end of 2010. Consequently we expect the Reserve Bank to remain on the sidelines for the remainder of 2009 and 2010. If we are wrong and the global economy recovers with the normal rapidity then expect some very aggressive tightening by the Reserve Bank and the Federal Reserve in 2010. Central banks will be anxious to move policy back to neutral once businesses and households are back maximising profits and utility.

Australia: Data Wrap

Jan TD-MI inflation gauge

The TD-Melbourne Institute inflation gauge bounced 0.8% in January (0.75% to two decimals) following a 0.2% (0.20% to two decimals) fall previously. The main sources of higher prices cited were domestic holidays, as well as one-off or once a year seasonal price increases for utilities, pharmaceuticals (the PBS safety net effect) and urban transport fares. Petrol prices (+0.4%mth) also added to the gauge for the first time since September, while rent pressures remained strong (+1.5%mth and almost +15%yr). Partially offsetting price falls were seen in nonalcoholic drinks and snack foods, bread and cereal products, and audio, visual and computing equipment. With a lower 0.3%mth result from January 2008 dropping out, annual growth in the gauge rebounded to 2.7%yr from 2.2%, but this still marked the third consecutive month where annual growth in the gauge has been 3% or lower.
With the January rise in the gauge considerably higher than seen three months prior in October (-0.25%mth), 3mth growth rebounded to -0.07% from -1.06% previously, the highest since October. It is the mid-month of the quarter read that has the better historical correlation with the quarterly headline CPI. Still, as an early 2009Q1 signal, with the current 3mth pace of -0.07% still historically weak, and actually lower than seen in the first month of Q4 for October (+0.32%), it tentatively implies another subdued Q1 headline CPI pace.

Q4 house prices

The official ABS house price data showed a much milder than expected -0.8% decline in Q4 - private sector measures had been pointing to a fall in the range 1.1 to 1.4%.
However this was offset by sizeable downward revisions to Q3 (to -2.4%qtr from -1.8%qtr) and Q2 (to -0.8%qtr from -0.2%qtr) which left the annual rate of price decline at -3.3%yr, the first annual falls recorded by the official data since 1996 and the biggest declines since the ABS series started in 1987-88 (although comparable real price declines were recorded in the early 1990s).
Nevertheless the price data still points to a moderating pace of decline in Q4. The RBA's 300bps in interest rate cuts and the boost to the First Home Buyers' grant clearly went some way towards stanching the losses. The presence of substantial latent demand due to an acute shortage of housing is also playing a supporting role for the market, with prices much more resilient in Australian than in the US, the UK and NZ.
Further interest rate cuts should continue to bolster prices through Q1 of 2009. However, housing markets will clearly remain under pressure with some segments likely to see renewed price weakness over the course of 2009 as the initial support from lower interest rates and the increased first home buyer grant dissipates and weakness stemming from the global financial crisis and economic downturn starts to impact from heavily on local labour markets.

Dec trade balance

The trade surplus was lower than expected in December at $589mn, a $390mn deterioration from a revised $979mn previously (was $1448mn). The consensus forecast was a surplus of $950mn and Westpac forecast $100mn.
Exports were weak, falling 3.1% despite unexpected strength in rural goods, weighed on by non-rural volumes weakness despite a rebound in iron ore volumes. A 5.3% fall in non-rural and other exports slowed trend growth to 0.7%mth, the weakest pace since October 2007.
Imports fell 1.7%, slowing trend growth to 0.4%mth, the weakest since October 2006. Volatile fuels and nonmonetary gold drove the decline. Consumption goods rose 1.6%, strengthening trend growth to 1.5%mth, but this trend reacceleration of late is price driven, and volumes have deteriorated sharply in line with the weakness in domestic demand. Capital goods bounced 20.0% (led by aircraft), but as with consumption goods, their trend gains through Q4 were price driven, with volumes weak.
Export and import values rose solidly in Q4, but prices were stronger still, implying significant weakness in export volumes as global demand and trade deteriorated markedly, and weaker import volumes as domestic demand slumped. We calculate that export volumes fell 7.4%qtr and import volumes fell 6.4%qtr. But with import volumes higher than export volumes, net export volumes have improved, giving a 0.0ppt net exports contribution to Q4 GDP growth (vs -0.4ppts previously).

Government Fiscal Package

Commonwealth Treasurer Swan unveiled an additional Budget Stimulus package on 3 February, valued at $42bn over four years. The package requires Parliamentary approval.
The $42bn "Nation Building" and "Jobs Plan" is estimated to boost GDP growth by 0.5% in 2008/09 and by 0.75% to 1.0% in 2009/10. The Government forecasts GDP growth to be 1.0% this financial year and 0.75% in 2009/10.
The Plan delivers an immediate stimulus to the economy via $12.7bn in bonuses, which are to be paid from early March and of which $11.0bn is to be paid in 2008/09.
Of the $28bn infrastructure package, $15.7bn is to be spent in 2009/10 and $9.8bn in 2010/11. Just $1.8bn is to be spent in 2008/09.
A budget deficit of $22.5bn is forecast for 2008/09, a 3.6% of GDP turnaround from the $19.7bn surplus in 2007/08. The deficit widens to $35.5bn in 2009/10, representing 2.9% of GDP. That compares with a deficit of 3.9% of GDP in the early 1990s recession.

Dec retail trade

Retail sales jumped +3.8% in December, well above market expectations of a +1.4% gain but shy of the 5% jump we were expecting.
Sales were up 5.7%yr after averaging 1.9%yr in the previous three months. All store categories and states recorded strong gains. As foreshadowed by the ABS, the trend series for retail sales has been temporarily suspended until the current spike in sales works through.
Nominal retail sales rose 1.6%qtr over Q4 as a whole, up solidly on the 0.1%qtr gain in Q3. CPI data suggests retail prices were up about 0.6%qtr, giving a 1% rise in real sales volumes for Q4.
Given the $8.7bn in fiscal payments to Australian households and additional boost from lower interest rates, the $700mn increase in retail sales month to month is decidedly tepid. Even with the dire global economic backdrop and extreme consumer caution, the flow through to spending points to a very sharp rise in the household savings rate (from basically zero in 2007 to well over 8%).

Dec dwelling approvals

Dwelling approvals fell a further 2.9%mth in December after a sharp 10.2% drop in November. This was well below market expectations of a 2.5% bounce.
The decline takes monthly approvals to 33% below year-ago levels and the lowest readings since the recession in the early 1980s (excluding the GST introduction period).
Moreover, weakness is coming across the board. Private sector house approvals declining 2.3%mth and apartment approvals falling 2.8%mth. Although monthly approvals have been more volatile at the state level all states are seeing entrenched downtrends with notable weakness in the core private sector house component.
The value of renovation approvals fell 2.7%mth to be down 15%yr. Meanwhile non-residential approvals continue to crumble in the face of severe funding constraints, the value of approvals sliding another 20.3% in December to be down a whopping 42% over the 2008H2 in trend terms.
The sharp falls in approvals in Q4 are concerning. Dwelling construction will now clearly contract sharply in Q1 of 2009 along with renovation and non-res building. However, the dwelling data remains somewhat at odds with other indicators - finance approvals in particular - that suggest there has been a more positive reaction to sharply lower interest rates and the increased first home buyer grant. The financial crisis may have seen many projects delayed and some cancelled altogether due to funding problems for developers (neither of these effects would be captured by the housing finance data). Overall we still expect approvals to firm over the course of 2009, but clearly there will be a bigger hole over the immediate short term and ongoing downside risks to the 2009 outlook.

Feb RBA Statement on Monetary Policy

The RBA has revised down its growth forecasts between the November and February SoMP, cutting the year to December 2009 GDP forecast to 0.5% from 1.75% (compared to Westpac's forecast of -0.6%). For 2010 the Bank has maintained a 2.5% forecast (vs Westpac's 2.2%). Non-farm GDP forecasts have been similarly reduced, but avoid the contraction that would imply a recession, with a low point of zero for the year to June 2009 (Westpac forecast is -1%yr).
The downward revisions to domestic growth stem from sharp downward revisions in world growth. Recovery in world growth is expected to result from significant stimulus packages. However, the Bank expects recovery to be quite gradual "consistent with the typical profile in the aftermath of financial crises". This emphasises that regardless of the domestic policy responses, the dominant driver of growth prospects, world growth, is likely to remain weak for some time.
Inflation forecasts have been downgraded by 0.5ppts in both 2009 and 2010. However, inflation prospects are not driving policy now. It is all about the global growth environment and the Bank's assessment that conditions have deteriorated even since the IMF's late January forecasts.
The Statement observes that credit is being withdrawn fro some industries, particularly in the property sector. With ongoing maturities and pressure from foreign banks withdrawing funds, this problem is unlikely to represent anything but a further drag on growth going forward.
There was no hint that the Bank sees its current cash rate as some type of 'floor'. We think further downward revisions to world growth will continue to be met with further rate cuts, and that 'floor' psychology will not become apparent until the cash rate reaches 2%.

Round-up of local data released last week

Date	Release	Previous	Latest	Mkt f/c
Mon 2	Jan AiG PMI	33.7	36.6	-
	Jan TD-MI infl ation gauge	-0.2%	0.8%	-
Tue 3	Q4 house prices	-2.4%	-0.8%	-1.0%
	Dec trade balance, AUDbn	0.979	0.589	0.950
	RBA policy announcement	4.25%	3.25%	3.25%
Wed 4	Dec retail trade, sa	0.4%	3.8%	1.4%
	Dec dwelling approvals	-10.2%	-	2.5%
Fri 6	Feb RBA Statement on Monetary Policy	-	2.9% -	-

New Zealand: The Week ahead & Economic Wrap

More working, working less

The Household Labour Force Survey provided another headscratcher in the December quarter, with an apparent 0.9% jump in employment against market forecasts of a 0.7% fall. However, the details of the survey confirmed that the labour market is indeed in decline, and provided further downside risk to what was already shaping up to be a dreadful Q4 GDP figure.

The employment figures have been remarkably volatile lately - for instance, last year we saw a 1.3% decline in Q1 that was fully reversed in Q2. The source of volatility is the number of people who declare themselves "not in the labour force” versus those who say they are "participating in the labour force”. Small sample sizes - an inevitable issue for small countries - can lead to substantial swings in this measure. And since the vast majority of people who declare themselves to be in the labour force are in work, participation and employment tend to lurch around in tandem. In fact, the participation rate also rose sharply this time, from 68.7% to 69.3%, whereas a fall in participation is more typical of a downturn. We expect to see a compensating decline in employment for the next quarter, in the order of -1.5%.

The unemployment rate is the better gauge of New Zealand's labour market. It rose again to 4.6%, which was in line with our expectation and on the low side of market forecasts. The labour market is gradually easing in response to the ongoing recession. Although there have been well-publicized layoffs in certain industries, other industries which have struggled for years to attract staff are finally seizing the opportunity to fill vacancies, as demonstrated by the industry composition of employment over the past year. The industries most exposed to the housing market downturn and international crisis - agriculture, construction, and manufacturing - have reduced employment levels by between 2% and 5%. Meanwhile, education and health have experienced employment increases of 7% and 4% respectively, presumably addressing preexisting staff shortages.

As we head into 2009 we expect layoffs in depressed industries to intensify, while vacancies in labour-shortage industries will dry up. Consequently, we expect the unemployment rate to rise more rapidly during 2009, hitting 6.4% by the end of the year. Still, that represents a less severe rate of unemployment than New Zealand experienced in the early 1990s, as there is clearly a greater degree of labour hoarding occurring in this cycle. The 1.9% fall in hours worked this quarter, and the 3.5% rise in part-time jobs, suggests that firms are responding to the slowdown by taking on staff for fewer hours, and/or giving less overtime, rather than moving straight to layoffs.

That aside, the 1.9% fall in hours worked was a shocker, and strongly suggests that economic activity fell sharply in Q4 last year. We see downside risk to our already-miserable -0.9% forecast for Q4 GDP. Other indicators certainly support our view that New Zealand is experiencing a labour market downturn. The NZIER's Quarterly Survey of Business Opinion shows that firms' employment intentions are at record lows, and that firms are finding it easy to find the skilled staff they need. And Monday's Quarterly Employment Survey showed that employers are paying employees for fewer hours of work.

On balance, these employment figures will be no impediment to further monetary easing. The RBNZ will be rightly sceptical about the bounce in employment, but they won't find out for another three months how much is to be reversed. The unemployment rate is rising at roughly the pace that they expected, and Q4 GDP is shaping up to be worse than expected. Our view remains that a 50bp cut is in the bag for the March Monetary Policy Statement, on the fast track to a low of 2.50%. The risk of a larger move rests on further downside surprises in the global economic data - which admittedly hasn't been the case for the most recent releases.

Next week's retail sales figures will provide further evidence of weak activity in Q4. Quarterly sales volumes are expected to be 0.9% lower, bringing the decline over the last year to a staggering 4.6%. Car sales have been the biggest source of weakness - we expect another 9% decline in Q4 - but the volume of core sales is also likely to remain weak, as cautious consumers save the gains from lower petrol prices, tax cuts and lower interest rates.

Round-up of local data released last week

Date	Release	Previous	Latest
Mon 2 Feb	Q4 labour cost index private ord time	1.1%	0.7%
	Q4 QES private sector ord time	1.1%	0.8%
Wed 4 Feb	Dec external migration ann.	3,573	3,814
	Jan ANZ commodity prices	-7.4%	-4.3%
Thu 5 Feb	Q4 HLFS employment	0.1%	0.9%
	Q4 HLFS unemployment	4.2%	4.6%

Data Previews

Aus Feb Westpac-MI Consumer Sentiment

Feb 11, Last: 89.9

The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 2.2% in January from 92.0 in December to 89.9 in January. The small decline unwound some of the 12% rally in sentiment through November-December, suggesting some of the initial boost from aggressive rate cuts and fiscal bonus payments may be starting to wane.
The February survey is in the field from the 2nd to the 8th. Sentiment is likely to be impacted by: a further 100bp rate cut from the RBA which has taken mortgage interest rates to 40yr lows; the Government's $42bn fiscal stimulus package including $12.7bn in immediate payments; and more stable financial markets (ASX down slightly by 1.1%); but a continued sharp deterioration in growth prospects both abroad and in Australia.

Aus Dec housing finance

Feb 11, Last: 1.3%, WBC f/c: 4.0%

Mkt f/c: 3.5%, Range: -1.0% to 9.0%

The recovery in demand for housing finance is underway, albeit a modest one so far. New lending is up 2.7% over the last three months. However, a sharper lift is expected in December. We're forecasting a 4% rise in finance approval numbers for owner occupiers - with anecdotes pointing to upside risk.
Recall that finance fell sharply after RBA rate hikes. New housing finance dropped 25% over the five months to June and then fell 2.6% over the two months to August.
The RBA has now cut rates aggressively over a short period of time. Rates are down by 4.0% to 3.25%, after an initial small 0.25% reduction last September. The vast bulk of the rate cuts have been passed through to lower variable mortgage rates.
The broadness of the finance recovery will be of great interest.

Aus Jan employment chg

Feb 12, Last: -1.2k, WBC f/c: -10k

Mkt f/c: -18k, Range: -30k to -10k

December employment was more resilient than expected, as part-time gains (likely related to retailers expecting spending of the Dec fiscal handouts) largely offset full-time weakness for a minor net 1.2k fall. Still, the trend deterioration has gathered pace over the last four months, with annual growth 1.30%yr (vs 1.58% prev), the weakest since Dec-01.
Our preferred indicators of labour demand continue to imply a more rapid deterioration in jobs growth through 2009H1, including our Westpac-ACCI Labour Market Composite, our composite of business survey jobs indicators, and detrended job ads. We look for a 10k jobs fall in Jan, taking the monthly trend negative for the first time this cycle, and giving a steeper slowing in annual trend growth to +0.97%yr. But risks are to the downside given recessionary levels of consumer LM pessimism and risks of a pullback in part-time jobs.

Aus Jan unemployment rate

Feb 12, Last: 4.5%, WBC f/c: 4.6%

Mkt f/c: 4.7%, Range: 4.6% to 4.8%

Despite a partially offsetting fall in the participation rate to 65.0% in Dec from 65.1%, the small jobs fall was sufficient to lift the unemployment rate to 4.5% from 4.4%, the highest since Mar-07. The trend unemployment rate was 4.4% for the second month, up from a low of 4.1% in Feb-08. The headline unemployment rate rounded up to 4.5% as it was 4.46% to two decimals.
We expect the historical pattern of weaker participation in months of employment falls to continue in Jan, looking for a further 0.1ppt fall in participation to 64.9%. While again this would partially offset our forecast 10k jobs fall, it would still see the unemployment rate rise to 4.6%, the highest since Feb-07. While we see downside risks for our employment forecast, these are matched by participation downside risks, leaving risks to our unemployment rate forecast balanced.

NZ Jan REINZ house prices

Feb 10-17, Last: -4.8% yr

The number of house sales have stabilised over recent months, albeit at an extremely low level following their plunge in the first half of 2008. House sales averaged just over 4,300 a month in the final quarter of 2008, down 35% from a year earlier.
House prices remain in trend decline as vendor expectations adjust to market conditions. We expect another price decline in January, although the pace of annual decline is expected to remain close to the -4.8% recorded in December.
Most interest will be in the sales figures. We will be looking for any evidence that the hefty interest cuts to date are encouraging buyers back to the market or whether the deteriorating labour market is holding sway. The balance of these pressures may well see house sales flat in January, on a seasonally adjusted basis.

NZ Q4 real retail sales

Feb 13, Last: -0.9%%, WBC f/c: -1.1%

Total retail sales in the month of December are expected to show a 0.9% fall, driven by less spending on fuel given a 9% drop in prices. Cautious consumers are expected to have saved their gains at the petrol pump with weakness in core sales also expected.
Electronic transaction and credit card data both point to declines in total sales, although these indicators gave the same signal in November when total retail sales came in flat. This gives the possibility that retail sales may ‘catch up' with the weakness in the card data in December.
Over the quarter, we estimate the volume of car sales fell around 9%. This is expected to drag total sales down by 0.9%. The volume of core sales is also expected to be weak as we anticipate cautious consumers saved gains from lower petrol prices, tax cuts and lower interest rates.

US Dec trade deficit to narrow again

Feb 11 , Last: -$40.4bn, WBC f/c: -$35.0bn

The trade deficit imploded in Nov when a 12% plunge in imports swamped a 5.8% drop in exports. Both outcomes amply illustrated the collapse in global trade during Q4, reflecting weak demand in the US economy and the freeze-up of global trade finance.
We expect the Dec report will show further declines on both sides of the ledger, although there is perhaps more scope for the exports decline to accelerate. Still, in dollar terms, the imports fall will again outpace exports, so the deficit should narrow further.
Features to watch for include a rise in aircraft exports following the end of the Boeing strike; and a further price driven fall in oil imports.

US Jan retail to post another very steep drop

Feb 12, Last: -2.7%, WBC f/c: -1.2%

Dec retail sales posted their steepest monthly decline since at least the early 1990s, and indeed the sixth straight fall. Plunging auto sales were a key driver, along with another double digit drop in gasoline, due to falling prices. Excluding those two components, core retail sales were down a very steep 1.5%.
The auto industry reported Jan unit sales were down a further 7%, which will weigh heavily on total retailing. However gasoline prices were steadier, according to the Dept of Energy, so the inevitable fall in Jan retailing will be less steep than in the closing months of 2008. Credit availability remained constrained, and we expect core retailing to post a further 0.5% drop, based on subdued weekly retail reports.
Tying these factors together, we expect a 1.2% fall in total retail sales, though the ex auto drop will be less at -0.6%.

Westpac Institutional Bank http://www.westpac.com.au

Disclaimer

All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

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Sunday, February 8, 2009