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Global & National Economic Outlook April 2011

This document should not be copied, reproduced or forwarded without the consent of OneSteel. The document contains information collated by OneSteel from various public sources regarding the current economic and steel industry environment and outlook and does not necessarily reflect OneSteel's opinions in relation to those matters. Recipients of this document should form their own views in relation to these matters and OneSteel makes no representation or warranty and accepts no responsibility, in relation to the accuracy, currency or completeness of any of the information contained in this document. Neither OneSteel, any of its related body corporate, their respective directors, employees, advisers or agents accept any responsibility or any liability for any loss or damage suffered or incurred by a recipient relating in any way to this document.

SLIDE 2

Global Environment Global Environment

Global & National Economic Outlook – April 2011

The document contains information collated by OneSteel from various public sources regarding the current economic and steel industry environment and outlook and does not necessarily reflect OneSteel's opinions in relation to those

• matters. Recipients of this document should form their own views in relation to these matters and OneSteel makes no

representation or warranty and accepts no responsibility, in relation to the accuracy, currency or completeness of any of the information contained in this document. Neither OneSteel, any of its related body corporate, their respective directors, employees, advisers or agents accept any responsibility or any liability for any loss or damage suffered or incurred by a recipient relating in any way to this document.

SLIDE 3

Global & National Economic Outlook – April 2011

Global Environment – Slowdown not as deep as expected Latest IMF Forecast (Jan-11 Update) - World GDP forecast for CY11 is 4.4% (0.2% increase from October 2010 Forecast).

Slide 3 World GDP - IMF

• 2
• 1

1 2 3 4 5 6 2007 2008 2009 2010 2011 2012 2013 2014 2015 % July 2009 Forecast October 2009 Forecast April 2010 Forecast October 2010 Forecast

Source: IMF

Forecast GDP much higher than initially expected (@ start of GFC)

SLIDE 4

Global & National Economic Outlook – April 2011

Global Environment – Asia leading the global economic recovery.

Slide 4

Asia is advancing with resilience in domestic demand -> benefiting commodities

• exporters. USA moderate whilst Europe gradual and uneven recovery.

Average Projected Real GDP Growth during 2010-11 (%)

SLIDE 5

Global & National Economic Outlook – April 2011

Global Environment – Two-speed recovery continues

Advanced economies – growth remains subdued, unemployment still high. Emerging economies – activity remains buoyant, inflation pressures, some signs of

• verheating

Slide 5

4.7 4.6 3.9 1.8 Middle East & North Africa 4.1 4.3 5.9 (1.8) Latin America & Caribbean 5.7 5.5 6.7 1.7 ASEAN-5 8.0 8.4 9.7 5.7 India 9.5 9.6 10.3 9.2 China 4.6 4.7 4.2 (6.5) CIS 4.0 3.6 4.2 (3.6) Central & Eastern Europe 2.7 2.3 2.9 (2.5) Canada 2.3 2.0 1.7 (4.9) United Kingdom 1.8 1.6 4.3 (6.3) Japan 1.7 1.5 1.8 (4.1) Euro Area 2.7 3.0 2.8 (2.6) USA 4.5 4.4 5.0 (0.6) World CY12F CY11F CY10A CY09A Year-on-Year % Change

Source: IMF

SLIDE 6

Global & National Economic Outlook – April 2011

Global Environment – Recovery in context Financial crisis driven recessions – long slow recoveries

97 98 99 100 101 102 103 104 105 106 2 4 6 8 10 12 97 98 99 100 101 102 103 104 105 106 Financial crises driven downturns All other

Source: IMF, ABS, Westpac Economics.

index index

Real GDP

Years

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SLIDE 7

Global & National Economic Outlook – April 2011

Slide 7

Global Environment – General Government Balance Government debt is reaching historical highs in many countries.

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Global & National Economic Outlook – April 2011

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Contribution to Global GDP Growth

US Developed (ex. US) Developing/Emerging

Source: International Monetary Fund; US Department of Agriculture

Emerging Economies Becoming Dominant Source of Growth

SLIDE 9

Global & National Economic Outlook – April 2011

Global Environment – China now 2nd Largest Economy China Purchase Price Parity is ~2X Currency Value

GDP (current prices) & GDP (PPP) 5000 10000 15000 20000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 US$ billion 200 400 600 800 1000 1200 1400 1600 US$ billion

China China PPP USA JPN JPN PPP AUS (RHS) AUS PPP (RHS) Source: IMF

USA LHS AUS RHS Japan LHS CHINA LHS Slide 9

SLIDE 10

Global & National Economic Outlook – April 2011

Global Environment – Chinese Renminbi China announced the un-pegging of the Renminbi from the US Dollar on 20 Jun 2010. As of 04 April 2011, the Renminbi has appreciated by 3.8% against the US Dollar.

Sources: Pacific Exchange Rate Service, Reserve Bank of Australia (Data to 04 April 2011)

Slide 10 Chinese Renminbi Versus Australian & US Dollar

4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 CNY/USD CNY/AUD

SLIDE 11

Global & National Economic Outlook – April 2011

Global Environment – Fixed Assets Investment in China is ongoing

 Fixed asset investment (FAI) in Yuan grew by 24.9%

in the first 2 months in CY11. Growth in real estate development in Yuan up 32.6% YoY for same period.

 Measures approved in January 2011 to cool China’s

housing market:

 Higher down payments for second homes (from 50% to

60%)

 More areas where home purchases are limited.  The government is also testing new property taxes in

Shanghai and Chongqing, southwestern China.

 The Chinese plans to construct 36m social housing units in the

next 5 years and would be ensuring land supply for small to medium size units.

Chinese Government’s steps to cool down a rapidly growing housing bubble is slowly having an impact.

Slide 11

 People’s Bank of China raised the official interest rate

for the 3rd time since mid-October 2010 by 0.25% to 6.06%.

 Banks lent 535.6bn yuan (A$80.8bn) in new loans in

February 2011 falling short of expectations of 650bn

• yuan. It was 193 bn yuan less than in February 2010.

 The reserve requirement ratio has been raised from

19.5% to 20% effective from 25 March 2011. This is the 6th increase since October 2010.

Chinese Fixed Assets Investment

50 100 150 200 250 300 350 400 450 500 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 US$ billion 0% 5% 10% 15% 20% 25% 30% 35% 40%

USD (LHS) YoY % Change (RHS)

Source: NBS

Chinese Monthly Investment in Real Estate

20,000 40,000 60,000 80,000 100,000 120,000 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 US$ Million 0% 10% 20% 30% 40% 50% 60% YoY % Growth

Monthly Investment (LHS) YoY % Growth (RHS) Source: NBS

SLIDE 12

Global & National Economic Outlook – April 2011

Global Environment – Railways in China Year-on-year growth in fixed asset investment in railways was 45.3% in the first 2 months of CY11.

 China’s National Development & Reform Commission (NDRC) has approved 5 new passenger

railways projects in July 2010:

 Beijing – Zhangjiakou (Hebei province),  Lianyungang – Yancheng (Jiangsu province),  Harbin – Jiamusi (Heilongjiang province),  Jilin city – Huichin (Jilin province) and  Hangzhou (Zhejiang province) – Huangshan Anhui province).  The combined length of these links is 1,391km with an expected cost of US$25bn.  China plans to have 120,000 km of rail track by 2020, 60% of which will be electric. At the moment,

there is less than 90,000 km of track.

 According to the Ministry of Railways, China will open 1,920 km of additional rail routes this year. By

2020 China wants to have 48,000 km of high-speed track. This will not only exceed any other country’s high-speed rail network, but it will be as much as the rest of the world put together.

 The fast train networks are transforming travel and opening up the economy in ways that are already

boosting productivity and economic activity.

Slide 12

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Global & National Economic Outlook – April 2011

Global Environment – Industrial Indicators in China

 Industrial production in February 2011 was

14.9% higher than February 2010.

 IMF (January 2011) forecasts China’s GDP to

be 9.6% growth for CY11 and 9.5% in CY12.

 China’s Purchasing Managers Index was

52.2% in February, declining for the 3rd consecutive month. This is the lowest reading in 6 months, indicating the relatively weak growth momentum of China’s manufacturing

• sector. This could be due to the tighter credit

conditions in China and the slower foreign demand.

 China's consumer price index hit 4.9% in

February, slightly below 5.1% in November - its highest level in 28 months. Annual inflation for 2010 was 3.3%, which is above the government's 3% target rate.

China’s Inflation Rate Nudges U.S. Retailers to Look to Other Asian Suppliers

Slide 13

China's Industrial Production (% yoy change) & PMI

5 10 15 20 25 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 IP YoY % 30 35 40 45 50 55 60 65 PMI

IP PMI Source: NBS, CFLP

Retail Sales & Consumer Confidence Index - China 90 95 100 105 110 115 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Index 0% 5% 10% 15% 20% 25%

%

Consumer Confidence Index (LHS) YoY % Retail Sales (RHS)

Source: NBS

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Global & National Economic Outlook – April 2011

Number of motor vehicles in relation to average income A number of other populous emerging markets could substantially increase vehicle ownership.

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Global & National Economic Outlook – April 2011

What if China & India reach 10% of US auto penetration?

If China and India reach 10% of US auto penetration, it is estimated that global steel demand would increase by 4%. If they reach Korean levels, then a 39% increase in global steel demand.

Implied additional global steel demand at various auto penetration thresholds (2009)

Slide 15

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Global & National Economic Outlook – April 2011

Per Capita Consumption of Steel The per capita consumption of steel in China has accelerated in the last ten years.

Source: Macquarie Research

Slide 16

SLIDE 17

Global & National Economic Outlook – April 2011

Global Environment – USA – State of its economy

The USA economy recovery is still held back by high unemployment and a weak housing market.

 Industrial production declined 0.1% in February after having

risen 0.3% in January. The capacity utilization rate for total industry dropped to 76.3%, a rate of 4.2% points below its average from 1972 to 2010.

 The unemployment rate fell by 0.1 percentage point to 8.8%

in March, while nonfarm payroll employment increased by 216,000. Employment gains occurred in professional and business services, health care, leisure and hospitality, and

• mining. Employment in manufacturing continued to trend

up. Slide 17

Industrial Production - USA

60 65 70 75 80 85 90 95 100 105 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Index (2007=100) 60 65 70 75 80 85 90 Capacity Utilisation %

Industrial Production (LHS) Capacity Utilisation (RHS)

Source: Board of Governors of The Federal Reserve System

Unemployment Rate - USA

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Unemployment Rate Underutilisation Rate

Source: U.S. Bureau of Labour Statistics

SLIDE 18

Global & National Economic Outlook – April 2011

Global Environment – USA – Housing

US Federal Reserve predicts there will be 2.25m foreclosure filings in 2010 and 2.25m in 2011

 National vacancy rates in the 4th quarter CY10 were

9.4% for rental housing and 2.7% for homeowner housing.

 The government currently backstops more than 85% of

the $10.6 trillion mortgage market through the Federal Housing Administration (FHA) and the taxpayer-funded mortgage buyers Fannie Mae and Freddie Mac.

 Home prices in January continued with the downward

trends set in late CY10. The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. Slide 18

Housing Inventory - USA

13 14 15 16 17 18 19 20 Q1 '00 Q1 '01 Q1 '02 Q1 '03 Q1 '04 Q1 '05 Q1 '06 Q1 '07 Q1 '08 Q1 '09 Q1 '10

• No. of Vacant Housing (million)

Source: US Census Bureau

1 2 3 4 5 6 7 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 %

Consumer Loans Commercial Loans Commercial Real Estate Residential Real Estate

US Commercial Banks' Loan Write-offs

Source: Board of Governors of the Federal Reserve System

Annualised values of quarterly write-offs, seasonally adjusted as a % of loans

• utstanding

S&P/Case Shiller Home Price Indices - USA

50 100 150 200 250 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Index (Jan-00=100)

• 25.0%
• 20.0%
• 15.0%
• 10.0%
• 5.0%

0.0% 5.0% 10.0% 15.0% 20.0% YoY % Change

YoY % Change (RHS) 20-City Composite Index

Source: Standard & Poor's

SLIDE 19

Global & National Economic Outlook – April 2011

Global Environment – Japan – State of its economy

Japan confirms China surpassed its economy in CY10

 Japan’s unemployment rate was 4.6% in February 2011.

Unemployed persons was 3.00 million, a decrease of 240 thousand or 7.4% from the previous year.

 Japan’s GDP in Q4 CY10 only grew by 0.6% compared to

same period last year. Japan’s economy will now be impacted by the earthquake and tsunami disaster that happened on 11 March 2011.

 Japan passed a new stimulus package worth US$59bn in

November aimed at averting the threat of a “double-dip”

• recession. This package is in addition to the US$11.17bn

stimulus package that was approved in September to create ~200k jobs. Slide 19

Gross Domestic Product - Japan

• 12
• 10
• 8
• 6
• 4
• 2

2 4 Q1 2000 Q3 2000 Q1 2001 Q3 2001 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 %

Source: Cabinet Office Japan, CRU

FORECAST

Effects of earthquake & tsunami not taken into account

Industrial Production - Japan

60 70 80 90 100 110 120 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Index (2005=100)

Source: Ministry of Economy, Trade and Industry

Unemployment Rate - Japan

1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 %

Source: Statistics Bureau, Japan

SLIDE 20

Global & National Economic Outlook – April 2011

Global Environment – Korea – State of its economy

Korea faces growing inflation threat.

 Exports in February rose 17.9% YoY to US$39bn

with large increases in exports to the China, USA and Japan. Imports rose by 16.3% YoY to US$36bn. Consumer goods and raw material imports increased.

 The GDP in South Korea expanded 0.50% in the

Q4 of CY10 over the previous quarter.

 Consumer prices rose 4.5% y-o-y in February.

The prices of livestock products surged due to the spread of foot-and-mouth disease, and those

• f processed food and oil products.

Slide 20

Gross Domestic Product - Korea

(6%) (4%) (2%) 0% 2% 4% 6% 8% 10% Q1 CY02 Q3 CY02 Q1 CY03 Q3 CY03 Q1 CY04 Q3 CY04 Q1 CY05 Q3 CY05 Q1 CY06 Q3 CY06 Q1 CY07 Q3 CY07 Q1 CY08 Q3 CY08 Q1 CY09 Q3 CY09 Q1 CY10 Q3 CY10 Q1 CY11 Q3 CY11 YoY %

Source: Bank of Korea, CRU FORECAST

Industrial Production Index - Korea

90 100 110 120 130 140 150 160 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Index (2005=100)

Source: OECD y

Exports & Imports - Republic of Korea (US$ million)

15 20 25 30 35 40 45 50 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 US$ million

Exports Imports Source: Ministry of Strategy & Finance, Korea

SLIDE 21

Global & National Economic Outlook – April 2011

Global Environment – Europe – State of its economy

Europe remains on its two-speed trajectory. High inflation raises risk of interest rate increase.

Eurozone’s annual inflation rate has exceeded the ECB’s target of 2%, rising to 2.4% in

• February. Primarily driven by an 11% y-o-y increase in energy prices.

Germany maintains its role as the powerhouse of the region. Exports boosted by strong

demand from emerging markets, particularly automobiles and capital goods.

Tensions in the European Sovereign Debt markets remain high with most debt spreads

• widening. Spain’s government debt is higher than the total of Ireland, Greece and

Portugal combined.

The euro area seasonally-adjusted unemployment rate was 9.9% in January 2011

compared with 10.0% in December 2010. The highest rate is in Spain at 20.4%.

Slide 21

Gross Domestic Product - Europe

(6%) (5%) (4%) (3%) (2%) (1%) 0% 1% 2% 3% 4% 5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 2013F 2014F 2015F

EU 27 Germany France Italy UK

Source: IMF FORECAST

75 80 85 90 95 100 105 110 115 120 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Index (2005=100)

France Germany Italy United Kingdom Europe

Industrial Production Index - Selected European Countries

Source: OECD

SLIDE 22

Global & National Economic Outlook – April 2011

Global Environment – AUD/USD Exchange Rates Financial market experts believe the Australian Dollar could go even higher although it is difficult to forecast. The Australian dollar hit a new a new post-float high of 104.22 US cents in early morning trade on 04 April 2011.

Reserve Bank of Australia (Data to 04 April 2011)

Slide 22 US Dollar Versus Australian Dollar

0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11

SLIDE 23

Global & National Economic Outlook – April 2011

Global Environment – Exchange Rate Developments - WAR



The Australian Dollar started to appreciate since April 2009 as risk appetites improved and local interest rates were more attractive than those of other major economies.



Australian Dollar continues to be strong as it undergoes economic recovery ahead of USA, Japan and Germany.



Countries are acting to influence currencies causing significant discomfort.



USA and Japan quantitative easing. Japan sold US$24.5bn to stop the yen increasing.



Central banks have sold the greenback and buying others such as Aus$, Euro, Yen and Yuan.



Recently in Sept Asian reserves (excl China) grew 3.1% (record level US$3Tr) as they bought US$ to temper the rise in their own currencies. China reserves in June were $2.5Tr

Reserve Bank of Australia (Data to 04 April 2011)

US Dollar continues to weaken.

Slide 23

US Dollar, Euro, Renimbi, NZD, Yen & Won Versus Australian Dollar

60 80 100 120 140 160 180 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Index (July 2006 = 100) USD EURO RMB NZ YEN Won

SLIDE 24

Global & National Economic Outlook – April 2011

Global Environment – USA – Currency devaluation – Q Easing

US Federal Reserve has acted with quantitative easing and is releasing a further US$600Bn in 2011. Pre-recession – US$700-US$800bn of Treasury notes.

Federal Reserve Bank of Cleveland

Slide 24

US Federal Reserve credit easing policy tools (US$trillion)

0.0 0.5 1.0 1.5 2.0 2.5 3.0 07 08 09 10 11 US$trillion

Fed Agency Debt Mortgage-Backed Securities Purch Liquidity to Key Credit Markets Lending to Financial Institutions Long Term Treasury Purchases Traditional Security Holdings

SLIDE 25

Global & National Economic Outlook – April 2011  Reserve Bank of Australia has held the interest rates at 4.75% since the last increase in

November 2010.

 Australia’s interest rates difference increased compared to other major economies.

Global Environment – Interest Rates Australia’s interest rate at 4.75% is much higher than interest rates in other major countries.

Source: www.fxstreet.com

Slide 25

Key Global Interest Rates

1 2 3 4 5 6 7 8 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Interest Rate % Bank of England Bank Of Canada Bank Of Japan US Fed Reserve Euro Area RBA

SLIDE 26

Global & National Economic Outlook – April 2011

Global Environment – Interest Rates – Asian & South American countries Asian and South American countries have been raising interest rates since middle of 2010.

Source: www.tradingeconomics.com

Slide 26

Interest Rates for selected Asian Countries

1 2 3 4 5 6 7 8 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Interest Rate %

China India Republic of Korea Taiwan Malaysia Thailand

Interest Rates for selected South American Countries

2 4 6 8 10 12 14 16 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Interest Rate %

Brazil Chile Peru

SLIDE 27

Global Steel Industry Global Steel Industry

Global & National Economic Outlook – April 2011

The document contains information collated by OneSteel from various public sources regarding the current economic and steel industry environment and outlook and does not necessarily reflect OneSteel's opinions in relation to those

• matters. Recipients of this document should form their own views in relation to these matters and OneSteel makes no

representation or warranty and accepts no responsibility, in relation to the accuracy, currency or completeness of any of the information contained in this document. Neither OneSteel, any of its related body corporate, their respective directors, employees, advisers or agents accept any responsibility or any liability for any loss or damage suffered or incurred by a recipient relating in any way to this document.

SLIDE 28

Global & National Economic Outlook – April 2011

Global Environment – GDP versus Apparent Steel Use (ASU)

Source: WorldSteel, IMF

Apparent steel use (finished steel) contracted by –6.6% (-80mmt) in 2009 but increased by 13.1% (147Mt) in 2010. Apparent steel use in 2010 was higher than the 2007 level.

The World Steel Association (worldsteel) has revised upwards the apparent steel use forecast for 2010. Worldsteel is now forecasting an apparent steel use growth

• f 13.1% compared to 8.4% in its April

Forecast. China’s apparent steel use growth was 9.2% during the period from January to August 2010. It is forecast the growth would be lower for the remainder of the year due to the Chinese government’s effort to slow down the real estate market and ongoing production control. Worldsteel forecasts 6.7% and 3.5% in 2010 and 2011 respectively. The apparent steel use in the USA is forecast to grow by 32.9% in 2010 and 9.4% to 82.1mmt in 2011 which will bring it back to 79.7% of the 2007 level.

Slide 28

World Growth Rates of ASU v GDP

• 15%
• 10%
• 5%

0% 5% 10% 15% 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

ASU GDP

SLIDE 29

Global & National Economic Outlook – April 2011

Global Steel Industry – Global Steel Demand

Global steel demand surpassed 2007’s record in 2010. All the difference and more was from China.

Source: Macquarie Research

Slide 29

SLIDE 30

Global & National Economic Outlook – April 2011

Global Steel Industry – Chinese steel consumption per capita China is on a rapid growth phase.

Source: Macquarie Research

Slide 30

SLIDE 31

Global & National Economic Outlook – April 2011

Global Steel Industry – Steel Demand Growth

Slide 31

Steel Demand

• 50

50 100 150 200 Japan South Korea Taiwan Asean China CIS Latin America Other North America Europe MT Growth 1994-2000 2000-2007 2007-2009 2009-2015

Source: CRU

SLIDE 32

Global & National Economic Outlook – April 2011

Global Steel Industry – Finished Steel Demand Forecast According to Macquarie Research, China’s steel demand growth drivers to slowly shift away from construction over time

Source: Macquarie Research

Slide 32

SLIDE 33

Global & National Economic Outlook – April 2011

Global Steel Industry – Growth in flat steel products Flat product consumption will drive growth in the longer term as manufacturing takes a greater share of steel demand.

Source: Macquarie Research

Slide 33

SLIDE 34

Global & National Economic Outlook – April 2011

Global Environment – Steel Industry Production

World crude steel production reached 1,414 mmt for CY10. This is an increase

• f 15% compared to CY09 and is a new

record for global crude steel production. Annual crude steel production for Asia was 881.2 mmt in CY10, an increase of 11.8% compared to CY09. Its share of world steel production rose from 63.5% in CY09 to 65.5% in CY10. China’s crude steel production increased by 9.3% to reach 626.7 mmt in CY10. However, its share of world steel production dropped to 44.3% in CY10 from 46.7% in CY09. The EU, North America and CIS recorded double digit growths albeit from low base in

• CY09. Crude steel production in the UK

and Greece continued to decline in CY10. World crude steel production was 116.5mmt in February 2011. This is 7.7% higher than February 2010. World crude steel capacity utilisation ratio increased from 80.9% in January to 82.0% in February.

World crude steel production continues to increase.

Slide 34

Crude Steel Production

20,000 40,000 60,000 80,000 100,000 120,000 140,000 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 '000 tonnes

• 50%
• 40%
• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 50%

China ROW ROW YoY Grow th China YoY Grow th Source: WorldSteel

World Steel Capacity Utilisation

58.1% 61.5% 67.8% 64.9% 67.1% 72.2% 74.4% 76.1% 75.6% 72.1% 79.3% 80.4% 80.5% 82.0% 80.9% 73.3% 75.2% 75.7% 74.6% 73.4% 74.7% 82.8% 79.7% 78.3% 72.1% 64.9% 82.1%

55% 60% 65% 70% 75% 80% 85% Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Capacity Utilisation Source: WorldSteel

SLIDE 35

Global & National Economic Outlook – April 2011

Global Steel Industry – Steel Industry Production

• China’s crude steel production

in 2010 was 58mmt higher than previous year and crude steel in ROW increased from 638mmt in 2009 to 769mmt (131mmt higher).

• Macquarie Research forecasts

that China’s crude steel production to grow by 8% to 691mmt in 2011. It is expected that in 2011, the property market will be slower and the Government’s stimulus programs would be completed by then.

• ROW crude steel production is

forecast to reach similar levels as 2007 by 2012.

Global steel production for 2011 is 172mmt higher than the 2007 peak – China 195mmt higher whereas ROW 23mmt lower.

Source: Macquarie Research

Slide 35

World Crude Steel Production

568 626 691 721 699 722 748 789 791 828 856 848 850 904 970 1069 1147 1251 13511326 1206 1396 869 836 796 697 751 859 833 881 904 927 1796 1740 1677 1610 1530 858 825 787 742 127 151 182 222 280 356 423 495 500 933 909 885 826 862 832 769 638 1523 1791 1734 1672 1604 200 400 600 800 1000 1200 1400 1600 1800 2000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

China (MRE Nov10) ROW (MRE Nov10) World (MRE Nov10) China (MRE Feb11) ROW (MRE Feb11) World (MRE Feb11)

ACTUAL FORECAST

SLIDE 36

Global & National Economic Outlook – April 2011

Global Environment – Steel production in China

Crude steel production in China for CY10 is 10.5% greater than last year. There was a spike in steel exports in June before mid-July 2010 i.e. when the VAT rebate of some of the steel products was removed. In the last quarter of CY10, steel production in China has been impacted by the electricity supply to some steel mills being cut to meet their 5-year greenhouse targets.

Source: Macquarie

Slide 36

Chinese net steel exports not expected to increase as VAT rebates for some steel products have been removed.

Chinese Net Steel Imports

(8,000) (6,000) (4,000) (2,000) 2,000 4,000 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 '000 tonnes

Source: UBS, TEX

SLIDE 37

International Pricing International Pricing

Global & National Economic Outlook – April 2011

The document contains information collated by OneSteel from various public sources regarding the current economic and steel industry environment and outlook and does not necessarily reflect OneSteel's opinions in relation to those

• matters. Recipients of this document should form their own views in relation to these matters and OneSteel makes no

representation or warranty and accepts no responsibility, in relation to the accuracy, currency or completeness of any of the information contained in this document. Neither OneSteel, any of its related body corporate, their respective directors, employees, advisers or agents accept any responsibility or any liability for any loss or damage suffered or incurred by a recipient relating in any way to this document.

SLIDE 38

Global & National Economic Outlook – April 2011

International Steel Pricing – Iron Ore Supply & Demand

Slide 38

SLIDE 39

Global & National Economic Outlook – April 2011

Seaborne Iron Ore Demand to increase ~ 800 Mt p.a. dominated by China

Source: CRU, Macquarie Research

200 400 600 800 1,000 1,200 1,400 2005 2006 2007 2008 2009 2010F 2011F 2012F 2013F 2014F 2015F Seaborne trade in iron ore (million tonnes) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Share of total China Others China share of total `

SLIDE 40

Global & National Economic Outlook – April 2011

International Steel Pricing – Iron Ore Demand & Pricing Analysts’ forecasts – iron ore prices will continue to be high in CY11.



Iron ore supply is expected to be tight for the rest of Q1 CY11 as India’s Supreme Court decision is not due till 4

• April. It is expected to allow iron ore exports from Karnataka to resume. The local government in Orissa is also

allowing production to restart at almost half of the 23 mines it had previously ordered to close.



The Indian government has just announced that they will lift the export duty for iron ore fines and lumps to 20%, while granting full exemption from export tariffs for iron ore pellets. The increased tariffs come into effect from 1 March 2011. There has been reports that the export tax for lower grade iron ore might be reduced.



It has been reported that Rio Tinto has informed customers of Q2 contract prices for iron ore fines and lump, which will rise 25.1% from Q1 levels.



Macquarie Research forecasts that CY11 will be another year when Chinese domestic ore production will need to be flat out. The high cost of Chinese production would keep the iron ore floor price to be high. Slide 40

Source: Macquarie 50 100 150 200 250 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 USD per tonne (cfr) Spot Contract

Source: CRU, Platts

Iron Ore Fines (62% Fe) - Contract & Spot (US$/t cfr Nth China)

SLIDE 41

Global & National Economic Outlook – April 2011

Iron Ore Cost Curve

Source: Macquarie Research

Macquarie’s view: High cost domestic Chinese ore supply will continue to be required in CY13 => creating an increased floor on iron ore pricing.

Slide 41

Supply Curve to Chinese m arket for Iron O re Fines - 2010

10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 950 1000 1050 1100 1150 1200 1250 1300 Volume (mt) C IF C

• st C

hine (U S$/t) R IO B H P A frica Other A us tralia FMG Vale India Other Other B razil C hina

S u p p ly cu rve to C h in ese m arket fo r Iro n O re F in es - 2013

1 2 3 4 5 6 7 8 9 1 1 1 1 2 1 3 1 4 1 5 1 6 5 1 1 5 2 2 5 3 3 5 4 4 5 5 5 5 6 6 5 7 7 5 8 8 5 9 9 5 1 1 5 1 1 1 1 5 1 2 1 2 5 1 3 1 3 5 1 4 1 4 5 1 5 V

• lu

m e (m t) C IF C

• s

t C h in a (U S $ /t) R IO B H P A fric a O th er B razil F M G V ale O th er A u s tralia In d ia O th er C h in a

SLIDE 42

Global & National Economic Outlook – April 2011

International Steel Pricing – Coking Coal Pricing

 The coking coal market was fundamentally tight prior to the Queensland floods. The floods have

made supply even tighter. The lack of geographical diversity to coking coal supply leaves it prone to

• shocks. It has been reported that both Anglo American and Rio Tinto has signed Q2 CY11 coking

coal contracts with Japanese steelmakers at US$330/t fob Australia.

 Queensland coking coal export volumes are likely to be down significantly for January and the rest of

Q1 CY11.

 Seaborne demand from Korea, Taiwan, China and Brazil is forecast to be double digit growth whilst

demand from India would be ~6%.

Q2 CY11 contract prices reported at US$330/t (fob Australia) due to tight supply and increasing demand.

Slide 42

Source: Macquarie Research

Hard Coking Coal Prices

20 70 120 170 220 270 320 370 420 470 520 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 A$/t fob Spot (A$/t) Contract Price (A$/t)

Source: CRU

SLIDE 43

Global & National Economic Outlook – April 2011

International Steel Pricing – Ferrous Scrap Pricing

 Chinese import scrap levels had reached record levels in CY09. However, scrap imports in CY10

were 57% lower than CY09 but still higher than CY07 and CY08. Chinese scrap imports in January dropped by 25% compared to January last year.

 Underlying demand in Asia remained relatively subdued with many traders digesting the recent array

• f monetary and fiscal policy tightening by the Chinese Government. Scrap supply in the region

remains tight.

 Scrap prices are likely to remain volatile in the short term, with the geopolitical tensions in the Middle

East causing uncertainty in Turkey and Western Europe and temporarily weakening the trade flows

• f scrap.

Scrap prices increased by US$100 in 2 months from November 2010, however, prices have started to drop recently.

Slide 43

Scrap Imports into China

200 400 600 800 1,000 1,200 1,400 1,600 1,800 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Thousand tonnes

2007 2008 2009 2010 2011

Source: Tex Report

Korean HM1 Scrap Price January 2004 to March 2011

$50 $150 $250 $350 $450 $550 $650 $750 $850 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 $/t c&f

Korean HM1 US$/t Korean HM1 AUS$/t

Source: Tex Report

SLIDE 44

Global & National Economic Outlook – April 2011

International Steel Pricing – Slab & Hot Rolled Coil

High raw materials costs have been driving slab and HRC prices up.

Slide 44

Asian Import Slab & HRC Prices to March 2011

0% 20% 40% 60% 80% 100% 120% 140% Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 % HRC over slab price 200 400 600 800 1,000 1,200 1,400 US$/t c&f

HRC/Slab % (LHS) Asian Import Slab (US$/t c&f) Far East Asia Import HRC (US$/t cfr) Source: CRU

Far East Asia HRC Prices versus Raw Materials Costs (US$/t)

200 400 600 800 1,000 1,200 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 US$/t

Far East Imports non CIS HRC US$/tonne c&f S.China Raw Materials (Iron Ore, Coal, Freight) Source : CRU

SLIDE 45

Global & National Economic Outlook – April 2011

International Steel Pricing – Structural Beams, Merchant Bar and Hot Rolled Coil

International Steel prices will continue to be impacted by changing Chinese Govt policies.

Red % indicates range between minimum and maximum prices for the year as a %

• f annual average price. For FY11, rolling 12-month prices were used to derive the

average, minimum and maximum prices. High % figure signifies high volatility.

 International Steel prices will continue to be

uncertain as China’s demand remains volatile with the latest policy measures to rein property price inflation including



Higher deposit requirements,



The suspension of bank loans for 3rd home purchases and



Tighter control of land for housing construction

 These measures would lead expectations of

weaker construction activity for the rest of the year.

Slide 45

Hot Rolled Structurals (East Asia Imports)

240 223 298 447 564 529 705 920 868 663 742

200 400 600 800 1,000 1,200 1,400 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 USD/tonne (c&f S. China)

31.9% 55.9% 21.3%31.2% 21.3% 59.2% 89.3% 27.1% 8.3%13.5%

Source: SBB

23.6% Merchant Bar (Far East Asia Imports non-CIS) 264 230 283 380 424 431 505 734 712 598 675

200 400 600 800 1,000 1,200 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 USD/tonne (c&f S. China)

23.0% 47.4% 9.4%26.7%17.8% 64.1% 82.9% 21.7% 18.9%8.7%

Source: CRU

20.7%

Hot Rolled Coil (Far East Asia Imports non-CIS)

231 209 325 404 576 441 521 716 617 585 661

200 400 600 800 1,000 1,200 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 USD/tonne (c&f S. China)

27.7% 53.3% 33.0% 48.7% 24.9% 66.3%108.6% 40.2% 32.5%52.6%

Source: CRU v

28.0%

SLIDE 46

Global & National Economic Outlook – April 2011

International Pricing – Non Ferrous

YTD FY11 average prices for non ferrous metals are higher than FY10 average prices.

Red % indicates range between minimum and maximum prices for the year as a % of annual average price. For FY11, rolling 12-month prices were used to derive the average, minimum and maximum prices. High % figure signifies high volatility.

Slide 46

Zinc LME Price

1,051 791 775 962 1,171 2,118 3,672 2,598 1,400 2,060 2,245

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 USD/tonne

6.5% 29.9%34.4% 112.0% 31.1% 63.6% 53.2% 41.0% 31.4% 12.3%

Source: Metal Bulletin

27.9% Nickel LME Price

7,240 5,929 7,666 12,264 14,959 15,488 37,946 28,500 13,302 19,125 23,894 10,000 20,000 30,000 40,000 50,000 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 USD/tonne

29.1% 53.3% 24.4%57.9% 67.4% 38.2% 78.5% 52.6% 34.6% 38.7%

Source: Metal Bulletin

36.6% Aluminium LME Price

1,539 1,359 1,360 1,569 1,807 2,245 2,692 2,668 1,863 2,005 2,310

500 1,000 1,500 2,000 2,500 3,000 3,500 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 USD/tonne

9.6% 20.0%16.0% 48.2%13.8% 23.3%93.1% 32.3% 9.7% 9.9%

Source: Metal Bulletin

24.4% Copper LME Price

1,784 1,516 1,594 2,333 3,150 5,052 7,080 7,782 4,919 6,644 8,510

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 USD/tonne

13.0% 55.7% 22.7% 87.7% 29.6% 27.2%108.5% 38.0% 19.7% 17.8%

Source: Metal Bulletin

36.6%

SLIDE 47

National Economy National Economy

Global & National Economic Outlook – April 2011

The document contains information collated by OneSteel from various public sources regarding the current economic and steel industry environment and outlook and does not necessarily reflect OneSteel's opinions in relation to those

• matters. Recipients of this document should form their own views in relation to these matters and OneSteel makes no

representation or warranty and accepts no responsibility, in relation to the accuracy, currency or completeness of any of the information contained in this document. Neither OneSteel, any of its related body corporate, their respective directors, employees, advisers or agents accept any responsibility or any liability for any loss or damage suffered or incurred by a recipient relating in any way to this document.

SLIDE 48

Global & National Economic Outlook – April 2011

Domestic Economy – GDP & CPI Australia remains home to one of the world's best performing economies. Australia's economy grew 0.7% in the December quarter. The economic impact of the flooding in Queensland will be reflected in the March quarter GDP.

Slide 48

GDP & CPI - Australia

• 2
• 1

1 2 3 4 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 % QoQ CPI GDP

Source: ABS

SLIDE 49

Global & National Economic Outlook – April 2011

Domestic Economy – Unemployment & Job Advertisements

 Unemployment rate (seasonally

adjusted) was 5.0% in February, unchanged compared to previous month.

 Number of people employed decreased

by 10,100 (full-time employment up by 47,600 but part-time employment decreased by 57,700).

 Number of people unemployed

decreased by 500 to 604,800 in February.

Unemployment rate at 5.0%. Job advertisements continue to rise.

 The number of job advertisements in

newspapers and internet in March were 195.9k nationally which was an increase

• f 1.3% over the number of job

advertisements in February. Job advertisements have been rising since May 2010.

 Under-employment rate decreased to

7.0% in February compared to the rate

• f 7.1% in November 2010 .

Slide 49

Under-employment Rates in Australia

1 2 3 4 5 6 7 8 9 Feb-78 Feb-80 Feb-82 Feb-84 Feb-86 Feb-88 Feb-90 Feb-92 Feb-94 Feb-96 Feb-98 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 %

Source: ABS

Unemployment Rates & Number of Job Advertisements (Australia)

100,000 120,000 140,000 160,000 180,000 200,000 220,000 240,000 260,000 280,000 300,000 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 Number of Job Advertisements 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 Unemployment Rates (%)

Job Advertisements Unemployment Rate Source: ABS, ANZ

SLIDE 50

Global & National Economic Outlook – April 2011

Domestic Economy – Consumer and Business Confidence

 The Westpac–Melbourne Institute Consumer Sentiment Index fell by 2.4% in March from 106.6 in

February to 104.1 in March. This is the lowest reading for the Index since June 2010 in the aftermath of three consecutive rate hikes by the Reserve Bank and controversy over the mining

• tax. The key factors behind this weak result appear to be concerns over budget and tax issues and

petrol prices.

 Business confidence increased by 10 index points in February to 14 index points.  Business conditions recovered to -2 in February from -6 in January. Mining is getting back to

normal and recreation is doing well. Retail, wholesale, construction and manufacturing continue to suffer.

Consumer confidence affected by budget and tax issues as well as high petrol

• prices. Business confidence recovers but sales and profits remain under pressure.

Slide 50

Westpac - Melbourne Institute Survey of Consumer Sentiment

75 80 85 90 95 100 105 110 115 120 125 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 Index

Source: Westpac, Melbourne Institute

NAB Business Confidence & Conditions Monthly Index

• 40
• 30
• 20
• 10

10 20 30 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Index

Business Confidence Business Conditions

Source: NAB

SLIDE 51

Global & National Economic Outlook – April 2011

Personal & Commercial Finance Commitments

Slide 51

Personal Finance Commitments

• 2

4 6 8 10 12 14 16 18 20 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 A$m

Secured Housing - Alterations and additions Secured Housing - Construction & purchase of dwellings Source: ABS

 The total value of loans for construction and purchase of dwellings dropped by

4.6% in January compared to the previous month. The value of loans for alterations and additions dropped by 12.3% for the same period.

 Commercial fixed loans fell by 4% and revolving credit fell by 9.7% in January

compared to previous month.

Home loans have been flat since the cessation of the 1st home buyer’s boost. Commercial loans have also been pretty flat.

Commercial Finance Commitments

• 10

20 30 40 50 60 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 A$bn

Fixed loans Revolving credit Source: ABS

SLIDE 52

Global & National Economic Outlook – April 2011

Domestic Economy – Credit Growth & Insolvencies

Slide 52

Households & businesses recording very weak credit growth due to lower demand for borrowing and modest tightening of lending standards Credit Growth in Australia Insolvencies in Australia

Insolvencies are easing in the rest

• f Australia but it is still a risk in

Queensland.

SLIDE 53

Global & National Economic Outlook – April 2011

Domestic Environment – Domestic Market Segment

Source: NIEIR & ABS

Comments on FY11 figures:



Residential commencements – lower growth compared to FY10 as most stimulus has been removed.



Population growth continues to drive a dwelling deficit which is estimated to be 207k at June 2011 and could grow to almost 255k by June 2012.



Non-Residential commencement – lower growth driven as the Building Education Revolution Program ends.



Engineering Construction (excl imports) – Decline due to many major projects in WA & Qld relying on imports.



Mining Output – strong growth driven by strong demand from China and rest of Asia.

Slide 53

FY07 FY08 FY09 FY10 FY11

2.5% 7.2% (13.8%) 14.2% 2.5% 13.7% 13.4% (21.2%) 39.9% (10.4%) 8.2% 9.1% 16.6% 6.1% (1.8%) 5.8% 6.4% 7.8% 5.4% 0.6% 9.9% (1.3%) 2.8% 6.1% 7.4% (4.2%) 0.6% (6.9%) (0.0%) 2.0% (1.0%) (23.2%) (8.1%) 7.2% 11.6% (22.0%) 9.3% 23.9% (0.9%) 12.2% 2.9% 3.4% 3.1% 2.3% 2.5% 3.6% 3.8% 1.4% 2.2% 2.4%

Economic Indicators

Residential Commencements Non-Residential Commencements Total Construction Engineering Construction Manufacturing Production (Adjusted for VA) Mining Production Agricultural Production Automotive Production (Adjusted for VA) GDP CPI

SLIDE 54

Global & National Economic Outlook – April 2011

Domestic Economy – Population Growth

Source: NIEIR

 Natural and net

• verseas

migration driven population growth for Australia is forecast to average around 357k per annum

• ver the next

decade.

 QLD exhibiting

strongest growth linked to resources sector and climate.

Strong population growth driven by overseas migrants (skills shortage) and increased fertility rates, helps to support economic growth.

Slide 54

Annual Net Population Growth (Thousands) NSW VIC QLD SA WA TAS NT ACT Australia FY2000 75 55 60 7 25

• 3

3 228 FY2001 89 63 67 7 27 2 4 260 FY2002 54 58 86 9 25 1 2 3 238 FY2003 44 60 94 10 27 5 1 3 244 FY2004 35 58 92 9 30 5 2 2 232 FY2005 49 67 94 12 34 4 4 3 267 FY2006 60 78 96 15 42 4 4 4 303 FY2007 89 95 105 18 54 3 4 7 375 FY2008 110 106 113 18 64 5 6 5 426 FY2009 120 116 117 20 68 5 5 6 457 FY2010 107 83 143 21 74 6 5 6 446 FY2011 95 86 128 18 60 4 4 4 400 FY2012 70 99 113 16 52 3 4 4 361 FY2013 42 105 109 14 52 3 4 3 331 FY2014 39 105 108 15 53 4 4 3 331 FY2015 42 100 107 15 54 4 4 4 330 FY2016 53 93 100 14 51 3 4 3 321 FY2017 53 95 103 14 53 3 4 3 329 FY2018 54 98 107 15 56 4 4 3 341 FY2019 56 103 112 16 59 4 4 3 357 FY2020 62 111 120 17 63 4 4 3 385 Average Annual growth FY10-FY20 61 98 114 16 57 4 4 4 357

SLIDE 55

Global & National Economic Outlook – April 2011

Domestic Economy – Comparison of Forecasts

BIS Shrapnel’s figures are only for private investment.

Slide 55

National Non-Residential Forecast ($ Value of Completions)

• 25%
• 20%
• 15%
• 10%
• 5%

0% 5% 10% FY09 FY10 FY11 FY12 % Growth UBS NIEIR BIS Shrapnel

National Residential Forecast ($ Value of Completions)

• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% FY09 FY10 FY11 FY12 % Growth NIEIR BIS Shrapnel

National Engineering Forecast ($ value of Completions)

• 10%
• 5%

0% 5% 10% 15% 20% 25% 30% FY09 FY10 FY11 FY12 % Growth

NIEIR BIS Shrapnel UBS

SLIDE 56

Global & National Economic Outlook – April 2011

Domestic Environment – Domestic Market Segment Indicators

 Non Residential - Major Drivers 

Completion of Government stimulus infrastructure spending (Health & Education)



Constraints on availability of debt slowly easing



Some projects delayed during the GFC onset will get underway

 Residential - Major Drivers  Removal of First Home Buyer Boost  Tighter lending criteria  Lower interest rates compared to

historical levels

 Strong interests from overseas migrants Slide 56

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Residential Construction Quarterly Expenditure - AUSTRALIA

Source: NIEIR

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Non-Residential Construction Quarterly Expenditure - AUSTRALIA

Source: NIEIR

SLIDE 57

Global & National Economic Outlook – April 2011

Domestic Environment – Domestic Market Segment Indicators

 Mining Production – Major Drivers  Coal  Iron Ore  Gold, Alumina, Bauxite  Cu, Lead, Zinc  Uranium  Underpinned by developing nations  Engineering Construction – Major Drivers  Water  Harbours  Roads  Electricity  Rail  Underpinned mostly by Government Nation

Building Program

Slide 57

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Engineering Construction Quarterly Expenditure - AUSTRALIA

Source: NIEIR (Excludes imported engineered construction)

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2002-03 $ million

Mining Production Quarterly Gross Value - AUSTRALIA

Source: NIEIR

SLIDE 58

Global & National Economic Outlook – April 2011

Domestic Environment – Domestic Market Segment Indicators

 Manufacturing Production – Major

Drivers

 White goods – plant closures  Automotive - plant closures  General manufacturing

competition

 Underpinned by low cost imports

due to strong Australian Dollar

 Agricultural Production –

Major Drivers

 Grain  Wool  Meat  Cotton  Underpinned by drought

abating and water availability (longer term).

Slide 58

20 40 60 80 100 120 140 160 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Index December 2002 = 100

Automotive Production & Value Add - AUSTRALIA

Automotive Production Automotive Value Add

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million Manufacturing Production Quarterly Gross Value - AUSTRALIA

Source: NIEIR

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Agricultural Production - AUSTRALIA

Source: NIEIR

SLIDE 59

Global & National Economic Outlook – April 2011

Domestic Economy – Residential Approvals

Total number of dwellings approved fell 7.4% in February whilst total value of residential building approved fell by 2.9%.

Slide 59

Value of Residential Approval in Australia

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 $ million

Residential Alterations & Additions (Res)

Source: ABS

Number of Houses Approved in Australia

2,000 4,000 6,000 8,000 10,000 12,000 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Number of Houses

• 40%
• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 50%

Number of Houses (LHS) % YoY change (RHS) % MoM change (RHS)

Source: ABS

Number of Apartment/Flats Approved in Australia 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Number of Apartments/Flats

• 100%
• 50%

0% 50% 100% 150% 200% 250%

Number of Apartments/Flats (LHS) % YoY change (RHS) % MoM change (RHS)

Source: ABS

Number of Townhouses Approved in Australia

500 1,000 1,500 2,000 2,500 3,000 3,500 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Number of Townhouses

• 100%
• 50%

0% 50% 100% 150% 200% Number of Townhouses (LHS) % YoY change (RHS) % MoM change (RHS)

Source: ABS

SLIDE 60

Global & National Economic Outlook – April 2011

Residential Construction Drivers

Underlying demand drivers continue to build and must drive growth in residential housing from here.

 Strong demographic

forces driving the growth in household formation.

 ageing population.  growth in overseas

adult migrants.

 Increasing excess

demand for dwellings.

 Rental vacancy rates at

low levels, forecast to “bottom” at around 1.9% in the next year or two.

 The imbalance in housing

markets will continue to grow - the excess demand for dwellings is projected to increase 246k by June 2015. The imbalance was reduced from December 2008 to June 2009 due to the increase of first home buyers.

Source: NIEIR February 2011

Slide 60

(300) (250) (200) (150) (100) (50)

• 50

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Dwelling Stock Surplus ('000) Dwelling Stock Surplus/Deficiency: Australia 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Rental Vacancy Rate: Australia 36.0% 36.2% 36.4% 36.6% 36.8% 37.0% 37.2% 37.4% 37.6% 37.8% Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Households to Population Ratio: Australia

SLIDE 61

Global & National Economic Outlook – April 2011

Residential Construction – Major Segment Forecasts

Source: NIEIR

Slide 61

5,000 5,500 6,000 6,500 7,000 7,500 8,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $million Houses Construction Quarterly Expenditure: Australia 200 300 400 500 600 700 800 900 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $million Semi-Detached Construction Quarterly Expenditure: Australia Semi-Detached 2+ storey Semi-Detached 1 storey 500 1,000 1,500 2,000 2,500 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $million Units Construction Quarterly Expenditure: Australia Units 3 storeys Units 1-2 storeys Units 4+ storeys 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $million Residential Renovations Quarterly Expenditure: Australia Other Work Done Alterations & Additions

SLIDE 62

Global & National Economic Outlook – April 2011

Residential Construction – State Forecasts

Source: NIEIR

Slide 62

3,000 3,500 4,000 4,500 5,000 5,500 6,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $million

Residential Construction Quarterly Expenditure - NSW

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Residential Construction Quarterly Expenditure - QLD

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Residential Construction Quarterly Expenditure - VIC

• 500

1,000 1,500 2,000 2,500 3,000 3,500 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Residential Construction Quarterly Expenditure - WA

SLIDE 63

Global & National Economic Outlook – April 2011

Domestic Economy – Non-Residential Finance, Approvals, Commencements

 Value of Non-Residential approvals rose by 59.3% in

February compared to previous month.

 The completion value of Non-Residential

commencements for the public sector during the 6 months ending Sep-10 decreased by 45% compared to the 6 months ending Mar-10. This decrease is due to the gradual completion of the projects in the Building the Education Revolution program.

 Completion value for private sector commencements

decreased by 7% for the same period.

Non-Residential public spending gradually decreasing and private sector still subdued.

Slide 63

Completion value commenced during qtr - Non- Residential Buildings (Seasonally adjusted)

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 $ millions Private Sector Public Sector

Source: ABS

Value of Non-Residential Approval in Australia

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 $ million

Source: ABS

Number of Non-House Building Approved 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 Feb-06 May-06 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 500 1,000 1,500 2,000 2,500

Private sector Public sector Source: ABS

SLIDE 64

Global & National Economic Outlook – April 2011

Non-Residential Construction – Top 30 Projects (No. 1 to 15)

Source: NIEIR

Slide 64

No. State Completion Date Cost ($m)

1 Unallocated 2012 16,200 2 Queensland 2016 1,970 3 Western Australia Late 2013 1,762 4 Queensland End 2012 1,761 5 South Australia 2016 1,700 6 New South Wales 2014 1,400 7 Australian Capital Territory na 1,400 8 New South Wales Mid 2012 1,200 9 Victoria 2011 1,100 10 Queensland 2012 1,100 11 Queensland 2012 1,100 12 New South Wales 2011 1,000 13 New South Wales na 1,000 14 Victoria 2015 1,000 15 Queensland 2016 1,000 Parkville Comprehensive Cancer Centre Project Under consideration Redevelopment of the Ipswich City Square shopping complex into a world-class regional centre, Ipswich Committed Development of the Southern Distribution Business Park, Goulburn Under construction Expansion of Warringah Mall - includes increases in retail space of up to 35,000 sqm and the addition of up to 1,000 car spaces Possible Construction of 7 new schools, southeast Queensland Under construction Construction of a new 359 public-bed Queensland Children's Hospital Under construction Redevelopment of the Sydney CBD incl. retail and office developments within the Centrepoint, Imperial Arcade and Skygarden centres, Pitt St., Sydney Under construction Redevelopment of the Royal Childrens' Hospital (new 7 storey building) - includes the expansion of the Murdoch Children's Research institute, Royal Park Under construction 'Civic Place' redevelopment (35,000sq m retail, 65,000 sq m office space and residential), Parramatta (Total cost $1.4b) Committed Development of The Canberra Technology City, 20 ''next generation'' data centres at Hume and 8 to 10 smaller centres at Belconnen Possible Construction of a new 750- bed Gold Coast University Hospital, Parklands Under construction Construction of the New Royal Adelaide Hospital, Adelaide Under consideration Construction of a new 450-bed hospital, Sunshine Coast Under consideration New 643-bed teaching hospital, Fiona Stanley Hospital (Southern Tertiary Hospital), Murdoch Under construction

Project Status

"Education Revolution" - upgrade and refurbishment of school facilities across Australia Under construction

SLIDE 65

Global & National Economic Outlook – April 2011

Non-Residential Construction – Top 30 Projects (No. 16 to 30)

Source: NIEIR

Slide 65

No. State Completion Date Cost ($m)

16 South Australia 2026 1,000 17 Western Australia 2015 1,000 18 New South Wales 2014 980 19 New South Wales 2017 900 20 Northern Territory 2015 900 21 Queensland 2014 889 22 Queensland Mid 2012 880 23 Victoria 2012 800 24 Queensland 2012 800 25 Queensland Q1 2011 800 26 Western Australia 2016 800 27 Victoria 2012 700 28 New South Wales 2012 650 29 New South Wales 2010 650 30 Queensland 2012 650 'Discovery Point' retail, residential and commercial complex at 'Interciti Arncliffe', urban village, near Wolli Creek station Under construction 'North Lakes' retail and commercial precinct, Mango Hill Under construction Bourke Junction - Construction of 2 office towers, a hotel, a medical centre, shops, gymnasium and a pub, Docklands` Committed Casuarina Village town centre development Under construction Construction of a 36-level office tower, Queen St above Regent Theatre, Brisbane Possible Upgrade Sir Charles Gairdner Hospital, Perth Under consideration Office and retail plan for former Carlton and United Breweries site, corner of Swanston and Victoria streets, Melbourne Committed Development of Riverside Centre Stage 2 - includes a 50-storey and 44-storey office tower, Brisbane Under consideration 240 extra kindergarten centres Under construction Construction of the 70 storey Trilogy Tower - includes a five-star hotel, 20,000sqm of

• ffice space and apartments, 480 Queens St., Brisbane

Under construction Revamp of the Sydney Opera House - includes dropping the Opera Hall floor by 18 metres to increase capacity and fixing design flaws Under consideration Darwin City Waterfront development (retail, commercial, tourist precinct) Under construction Construction of a new commercial office development (160 ha), Jandakot Airport Under construction Royal North Shore Hospital development, stage 2, St Leonards Under construction Redevelopment of the former Mitsubishi Plant site, Sherriffs Rd, into the 25ha Southlink Industrial Park Possible

Project Status

SLIDE 66

Global & National Economic Outlook – April 2011

Non-Residential Construction – Work Done, Under Construction, Committed

Source: NIEIR

Slide 66

2000 4000 6000 8000 10000 12000 Ju n-98 Se p

• 98

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• 98

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• 99

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$m

Australia: Non-residential

Work Done Under Construction Committed Under Consideration

SLIDE 67

Global & National Economic Outlook – April 2011

Non-Residential Construction – Major Segment Forecasts

Source: NIEIR

Slide 67

Non-Residential Construction Quarterly Expenditure - Australia (Health & Education)

• 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million Health Education Non-Residential Construction Quarterly Expenditure - Australia (Hotels & Entertainment) 100 150 200 250 300 350 400 450 500 550 600 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million Entertainment Hotels Non-Residential Construction Quarterly Expenditure - Australia (Shops & Factories)

• 200

400 600 800 1,000 1,200 1,400 1,600 1,800 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million Shops Factories 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million Other Business Offices Non-Residential Construction Quarterly Expenditure - Australia (Offices & Other Business)

SLIDE 68

Global & National Economic Outlook – April 2011

Non-Residential Construction – State Forecasts

Source: NIEIR

Slide 68

• 500

1,000 1,500 2,000 2,500 3,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Non-Residential Construction Quarterly Expenditure - VIC

• 500

1,000 1,500 2,000 2,500 3,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $million

Non-Residential Construction Quarterly Expenditure - NSW

• 500

1,000 1,500 2,000 2,500 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Non-Residential Construction Quarterly Expenditure - QLD

• 200

400 600 800 1,000 1,200 1,400 1,600 1,800 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Non-Residential Construction Quarterly Expenditure - WA

SLIDE 69

Global & National Economic Outlook – April 2011

Engineering Construction – Top 30 Projects (No. 1 to 15)

Source: NIEIR

Slide 69

No. State Completion Date Cost ($m)

1 Unallocated End 2014 45,000 2 Western Australia 2015 43,000 3 Unallocated 2018 40,900 4 Queensland 2020 35,000 5 Western Australia 2015 30,000 6 Northern Territory Late 2014 30,000 7 South Australia 2015 21,000 8 Queensland 2015 16,200 9 Queensland 2014 15,000 10 Western Australia Aug-11 14,000 11 Western Australia 2015 10,000 12 Western Australia 2016 8,900 13 Queensland 2016 8200 14 Queensland 2014 7,500 15 Western Australia 2014 7,200

Project Status

Project Iron Boomerang: 3370km railway from Port Hedland to the Bowen Basin coalfields (includes two iron smelters) Possible Gorgon LNG project (15 mtpa) (three liquefaction trains) , Barrow Island Under construction New open access, high-speed, fibre-based broadband network to 90 per cent of Australian homes, schools and businesses Under consideration 'Australia Pacific LNG' - New CSG to LNG facility, includes a 450-kilometre transmission line, Curtis Island at Gladstone Under consideration North West Shelf LNG Project "Kimberly Gas Hub": Two LNG trains, Brecknock & Scott Reef gas field, James Price Point, Broome Under consideration Development of the Ichthys gas field, Browse Basin, and LNG facility in Darwin Under consideration Olympic Dam expansion to mine uranium and copper (1.4 mtpa) Under consideration New LNG facility, Gladstone, based on Coal Seam Methane reserves Under consideration Curtis LNG project - construction of an LNG plant and a 540km pipeline to pipe gas from the Surat Basin Committed Pluto 1 LNG project Under construction Development of a LNG project, Wheatstone, near Carnarvon Basin Under consideration Prelude LNG project - floating LNG platform, Browse Basin Under consideration Brisbane underground rail project Possible Alpha Coal Project: thermal coal mining project - includes 490km train line, port construction and equipment and infrastructure construction, Galilee Basin Under consideration Roy Hill 1 iron ore project: includes 300km rail line to Port Hedland and new berths Committed

SLIDE 70

Global & National Economic Outlook – April 2011

Engineering Construction – Top 30 Projects (No. 16 to 30)

Source: NIEIR

Slide 70

No. State Completion Date Cost ($m)

16 New South Wales na 7,000 17 Western Australia 2H 2012 6,740 18 New South Wales 2024 6,700 19 Western Australia na 6,220 20 Victoria 2017 6,000 21 Queensland 2014 6,000 22 Northern Territory 2016 5,940 23 Victoria End 2011 5,700 24 Queensland Mid 2012 5,600 25 Western Australia Late 2011 5,000 26 Western Australia Mar-13 5,000 27 Western Australia Jun-13 4,810 28 Unallocated 2030 4,700 29 New South Wales na 4,530 30 Western Australia Early 2014 4,370 M4 East project, includes a 14km toll tunnel linking the M4 motorway to Sydney airport and Port Botany Possible

Project Status

Rapid Growth Project 5 Under construction North West Metro - 23km heavy rail link from Epping to Rouse Hill with six stations Possible Solomon iron ore project - Stage 2 to increase capacity from 60mtpa to 160mtpa Possible Missing Link - construction of a freeway between Greensborough and Bulleen Possible Wandoan coal mine - including rail link to the mine site Under consideration Greater Sunrise gas development - floating LNG platform,, Timor Sea north of Australia Possible Development of a desalination plant in Gippsland, the Wonthaggi region, southeast of Melbourne Under construction Airport Link - a continuation of the NSBT mainly by tunnel north to Sandgate Road, Gympie Road and the East-West Arterial, linking to Airport Drive. Under construction Scarborough LNG project, 280 km North West of Onslow Possible North Rankin Redevelopment (NR2) - construction and installation of a new gas platform, North Rankin B (NRB) and modifications at North Rankin A (NRA) Under construction West Pilbara iron ore project Under consideration Melbourne to Brisbane rail link: through Albury, Parkes, Moree, Toowoomba and to Brisbane Possible Western Express CityRail Service - new underground platforms at Redfern, Central, Town Hall and Wynyard Possible Construction of a rail and port development including a deepwater port and a 450km railway, Oakajee, north of Geraldton Committed

SLIDE 71

Global & National Economic Outlook – April 2011

Engineering Construction – Work Done, Under Construction, Committed

Source: NIEIR

Slide 71

5000 10000 15000 20000 25000 30000 35000 40000 Ju n-98 Se p

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$m

Australia: Engineering

Work Done Under Construction Committed Under Consideration

SLIDE 72

Global & National Economic Outlook – April 2011

Engineering Construction – Major Segment Forecasts

Source: NIEIR

Slide 72

Engineering Construction Quarterly Expenditure - Australia (Heavy Industry) 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million Engineering Construction Quarterly Expenditure - Australia (Roads, Highways & Subdivisions) 1500 2000 2500 3000 3500 4000 4500 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million Engineering Construction Quarterly Expenditure - Australia (Bridges, Railways & Harbours) 500 1000 1500 2000 2500 3000 3500 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million Engineering Construction Quarterly Expenditure - Australia (Water Storage & Supply, Sewarage & Drainage) 500 1000 1500 2000 2500 3000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

SLIDE 73

Global & National Economic Outlook – April 2011

Engineering – Port Developments across Australia

Slide 73

WA

• $17.5Bn iron ore

port development from 2011 to 2014 Qld & NSW

• $7.4Bn coal port

development.

Source: Australian Financial Review

SLIDE 74

Global & National Economic Outlook – April 2011

Engineering Construction – State Forecasts

Source: NIEIR

Slide 74

• 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $million

Engineering Construction Quarterly Expenditure - NSW

• 1,000

2,000 3,000 4,000 5,000 6,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Engineering Construction Quarterly Expenditure - QLD

• 500

1,000 1,500 2,000 2,500 3,000 3,500 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Engineering Construction Quarterly Expenditure - VIC

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Engineering Construction Quarterly Expenditure - WA

SLIDE 75

Global & National Economic Outlook – April 2011

Manufacturing Production – Segment Forecasts

Source: NIEIR

Slide 75

Manufacturing Production - Australia (Food & beverages) 16,000 18,000 20,000 22,000 24,000 26,000 28,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million Manufacturing Production - Australia (Textile & Clothing, Electronic Equipment & Wood Products) 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Electronic Equipment Textile & Clothing Wood Products

Manufacturing Production - Australia (Chemical, Petroleum & Paper) 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Petroleum Chemicals Paper

Manufacturing Production - Australia (Non-Ferrous Metals, Iron & Steel, Non-Metallic Minerals) 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Iron & Steel Non-ferrous Metals Non-Metallics Minerals

SLIDE 76

Global & National Economic Outlook – April 2011

Manufacturing Value Add - National

Source: NIEIR

Slide 76

60 70 80 90 100 110 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Index December 2002 = 100

Manufacturing Production & Value Add - AUSTRALIA

Manufacturing Value Add Manufacturing Production

SLIDE 77

Global & National Economic Outlook – April 2011

Automotive Value Add - National

Source: NIEIR

Slide 77

20 40 60 80 100 120 140 160 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Index December 2002 = 100

Automotive Production & Value Add - AUSTRALIA

Automotive Production Automotive Value Add

SLIDE 78

Global & National Economic Outlook – April 2011

Agricultural – Segment Forecasts

Source: NIEIR

Slide 78

Stock Level - Cattle 26 27 28 29 30 31 32 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 million Stock Level - Sheep 60 65 70 75 80 85 90 95 100 105 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 million Stock Level - Poultry 70,000 75,000 80,000 85,000 90,000 95,000 100,000 105,000 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 million Aquaculture Segment Production 30 35 40 45 50 55 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 kt

SLIDE 79

Global & National Economic Outlook – April 2011

Agricultural – Disposable Farm Incomes

Source: NIEIR

Slide 79

• 100

200 300 400 500 600 700 800 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $million

Disposable Farm Income - NSW

• 100

200 300 400 500 600 700 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Disposable Farm Income - QLD

• 100

200 300 400 500 600 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Disposable Farm Income - VIC

• 50

100 150 200 250 300 350 400 450 500 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 2007-08 $ million

Disposable Farm Income - WA

SLIDE 80

Global & National Economic Outlook – April 2011

Domestic Economy – Key Points

 Resources strength expected to continue – urbanisation of emerging economies

especially China and India is a long term story.

 Manufacturing sector, exports and tourism in Australia under pressure from high

Australian Dollar. On the other hand, cheaper electrical and electronic goods.

 Australian GDP to continue to improve driven by consumerism and resources.  Unemployment rates stable and under employment improving. Employment numbers

rising.

 Higher interest rates may threaten residential construction recovery.  Non-residential and engineering construction forecast by NIEIR to improve from recent

lows but to be subdued for some time.

 Agricultural production and investment forecast by NIEIR to strengthen.  Net overseas migration, and population growth, is a key facilitator of long term growth.  Inflationary threats could undermine growth.  Economic activity will vary greatly in different states with Queensland and WA driven by

strength of the resources sector.

Slide 80

SLIDE 81

Global & National Economic Outlook – April 2011

Domestic Economy – Forecast State GDP Growth Strong growth continues in Queensland and Western Australia.

High compound growth rates for FY10 to FY20 period for Western Australia and Queensland’s Gross State Product continue to be driven by strong commodities market.

Source: NIEIR

Slide 81

Annual Gross State Product Growth (Percent Year on Year) NSW VIC QLD SA WA TAS NT ACT Australia FY2001 2.5% 1.4% 3.2% 3.2%

• 0.2%
• 1.1%

5.4% 3.5% 2.1% FY2002 2.2% 3.6% 6.1% 4.1% 6.8% 5.2% 1.8% 3.0% 3.9% FY2003 2.6% 3.2% 5.0% 1.8% 4.1% 3.0% 0.5% 3.8% 3.3% FY2004 1.9% 4.9% 6.6% 4.5% 6.3% 4.3% 2.5% 1.2% 4.2% FY2005 1.4% 3.1% 5.3% 0.8% 4.4% 2.8% 5.6% 3.2% 3.0% FY2006 1.1% 3.0% 4.5% 3.3% 6.1% 2.4% 6.7% 4.7% 3.1% FY2007 2.2% 3.0% 5.0% 0.9% 7.4% 2.5% 5.5% 3.9% 3.6% FY2008 2.9% 3.3% 4.2% 3.0% 7.4% 0.4% 5.4% 2.9% 3.8% FY2009 1.1% 1.6% 1.2% 2.2% 1.6% 2.1% 3.7% 2.2% 1.4% FY2010 1.9% 2.2% 1.8% 1.7% 4.5% 0.6% 1.5% 1.1% 2.2% FY2011 2.4% 2.5% 1.3% 2.0% 3.8% 2.7% 1.0% 2.5% 2.4% FY2012 2.9% 3.8% 6.2% 2.2% 5.0% 2.3% 3.1% 2.5% 4.0% FY2013 1.8% 3.0% 5.0% 2.0% 5.6% 1.8% 3.7% 2.5% 3.3% FY2014 1.8% 2.2% 3.1% 1.7% 2.8% 1.1% 2.2% 2.2% 2.3% FY2015 1.4% 2.2% 3.3% 1.7% 4.3% 1.9% 3.7% 3.0% 2.5% FY2016 2.1% 3.2% 4.1% 1.8% 4.7% 1.8% 2.1% 2.5% 3.1% FY2017 2.3% 3.1% 4.0% 1.6% 4.5% 1.6% 1.9% 2.3% 3.1% FY2018 2.2% 2.6% 3.5% 1.2% 4.1% 1.2% 1.5% 1.8% 2.8% FY2019 1.1% 1.6% 4.2% 1.6% 3.3% 4.1% 28.6% 4.3% 2.7% FY2020 2.8% 3.4% 5.2% 3.7% 6.3% 2.2% 3.4% 2.5% 4.0% Compound Growth Rate % FY10-FY20 2.1% 2.8% 4.0% 1.9% 4.5% 2.1% 4.9% 2.6% 3.0%

SLIDE 82

Global & National Economic Outlook – April 2011

Population – Australia – @ June 2010

 Estimated resident population

• f Australia at 30 June 2010

was 22.3 million persons, an increase of 377k a year ago.

 Natural increase was 162k

persons whilst net overseas migration was 216k persons.

 Largest annual increase was in

New South Wales (105k) followed by Victoria (99k) and Queensland (89k).

7.24 4.52 1.64 5.55 0.51 0.23 2.30 0.36

Resident population in millions.

Source ABS.

Slide 82

Australia’s population growth rate lowest since March 2007.