Economic Insights: Global and Domestic Outlook

Finance and City Governance Committee NET BORROWINGS Investments and Funding 2 May 2023 March 2023 Quarter Corporate Finance Organisational Services

Global Economy Outlook The Organisation for Economic Co- operation and Development s (OECD) forecast for global growth has improved slightly to 2.6% for 2023, up from last year s forecast of 2.2%. The global growth outlook for 2023 remains fragile, however global inflation and commodity prices appear to have peaked. Key risks to the outlook continue to include persistent elevated inflation, an escalation in geopolitical tensions in Europe and financial market vulnerabilities. Commodity prices have softened from historically elevated levels over recent months, however continue to remain volatile. Inflation appears to have peaked late last year, with inflation in the OECD recording 9.2% in January 2023, down from the high of 10.7% reached in October 2022. OECD Forecast Real GDP Growth Projections Source: OECD Economic Outlook March 2023

Domestic Economy Outlook Australian GDP grew 0.5% in the December 2022 quarter (September 2022 quarter +0.6%) and 2.7% over 2022. The result was below market expectations and driven by weak household spending (slowing to 0.3% from 1.0% in the September quarter). Retail sales remain strong, up 6.4% in the year to February 2023, but a material slowing since late 2022. Households are continuing to drawdown on savings, with the saving rate falling to 4.5% in December 2022. The RBA forecast of GDP growth has been revised up to 1.6% (from 1.4% the November forecast) in 2023, slowing from 2.7% growth in 2022.

Domestic Economy Outlook Inflation CPI increased by 7.8% in the year to December 2022, up from 7.3% in September 2022, with new dwellings, food, automotive fuel and travel recording the most significant increases. The RBA expects inflation to moderate over 2023, lowering to 4.8% by year end, and to 3.0% by mid-2025. Increases in the cost of essential items continues to outpace the increase in discretionary goods and services. Construction input costs have risen on average 11.7% over the year to December 2022. Some categories have far exceeded this average with sand increasing 26.5% and concrete 14.7%.

Domestic Economy Outlook Labour Market remains resilient Employment Unemployment improved to 3.5% in February 2023. Participation remained largely unchanged, both statistics are near record levels. Wage growth of 3.3% was recorded in the year to December 2022, lower than market expectations, however still reaching the fastest annual pace since 2012. Australia s population grew 1.6% in the year to September 2022. Westpac expects strong international migration in 2023 and 2024. The labour market is forecast to ease slightly across 2023, with unemployment expected to rise to 4.6% by year end.

Domestic Economy Outlook Australian dollar The AUD/USD at 31 March 2023 was 0.67. NAB forecast the AUD/USD to rebound through 2023, reaching 0.78 by the year end. Commodities The price of key Australian commodities have come off the record highs reached in 2022, with large falls in thermal coal and brent prices. Westpac forecasts commodity prices to continue to ease as global growth slows.

Interest Rates Outlook Westpac Interest Rate Forecast The RBA Board held the cash rate at 3.60% at the April 2023 board meeting. The decision to pause was aimed at allowing more time to assess the state of the economy and the outlook, in an environment of considerable uncertainty . Market pricing continues to be volatile, however the current forecasts are that interest rates are close to the peak. Westpac forecasts rates to reach a peak of 3.85% in May/June 2023 and remain at that level for the remainder of the year. 3, 5 and 10 year Government bond rates remain volatile reflecting the uncertainty around inflation and the associated monetary policy response.

Queensland Outlook Queensland s economy contracted 0.3% in the December quarter, to record 2.4% in 2022, down from 4.6% in 2021. Compared to pre-pandemic, Queensland s economy has grown 10.5%, outperforming Victoria and New South Wales. Queensland continues to record the strongest population growth in the country at 2.2%, with net interstate migration from New South Wales and Victoria a strong contributor. Net overseas migration is also strong, close to record levels. Queensland s unemployment rate was unchanged in February 2023 at 3.7%.

Investments Maturity Risk as at $'000 Mar-23 4d $14,205 7d 14d 30d 60d 90d 180d Total $14,205 CBA Transactional Account Foreign Currency Account AUD equivalent Trust Bank Account Term Deposits QTC Trust Cash Fund with notice QTC Cash Fund & CBA 11am Total Investments $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $50,000 $0 $0 $0 $50,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $145,000 $95,000 $290,000 $27,303 $84,000 $415,508 $27,303 $84,000 $125,508 $0 $0 $0 $0 $0 $0 $145,000 $95,000

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Leasing Exposure