The Government Budget deficit in Australia

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1 2013/14 Australian budget: Got me under pressure Economic research note 20 May 2013 The 2013/14 Australian Budget estimates a deficit of $A18.0bn, or 1.1% of GDP. While this is an improvement from the $A19.4bn, 1.3% of GDP, deficit now estimated for 2012/13, it is a far cry from the surplus of $A2.0bn estimated for 2013/14 this time last year. Even with the deteriorating fiscal position of Australia, net government debt is still expected to peak at just 11.4% of GDP in Australia s AAA credit rating remains safe at this stage. The government again highlights that revenues have taken a big hit, but revenues still grew by 6.2% in 2012/13 and is forecast to grow a further 7.3% in 2013/14. Outlays growth was more contained in 2012/13, but will rise by 6.5% in 2013/14. The impact on the economy from the Budget is expected to be minimal, with the fiscal contraction imposed on the economy in 2013/14 just 0.2% points. This would imply limited implications for monetary policy from the budget. The supply of bonds is expected to rise, but this is unlikely to concern bond investors. The implications for the equity market are also expected to be modest. Overview and market implications: The 2013/14 Commonwealth budget estimates a deficit for the year of $A18.0bn, 1.1% of GDP. This is a slight improvement from the deficit of $A19.4bn, 1.3% of GDP, now expected for 2012/13. However, it is worth remembering that this time last year the 2012/13 budget was originally forecast as a surplus of $A1.5bn, (0.1% of GDP), while the 2013/14 budget was estimated at a $A2bn surplus, 0.1% of GDP. For the outyears the budget is now expected to be in deficit by $A10.9bn, 0.6% of GDP, in 2014/15. An improvement to a balanced outcome is expected in 2015/16, moving to a surplus of $A6.6bn, 0.4% of GDP, in 2016/17. As has been well signalled by the government, Australia s fiscal position has taken a big hit from substantially weaker-thanexpected revenue flows. For 2012/13 revenue is now forecast at $A350.4bn, down $A18.4bn from the $A368.8bn estimated this time last year. For 2013/14 revenue is now expected to be $A376.0bn, some $A16.5bn lower than the previous estimate of $A392.5bn. It is important to note, however, that government revenue still actually grew by 6.2% in 2012/13 and is forecast to grow by a further 7.3% in 2013/14. A key issue for the Budget is that outlays contracted by 1.0% in 2012/13 (to $A367.3bn), but are forecast to grow by a large 6.5% in 2013/14 (to $A391.2bn). For 2012/13 the original Budget estimated a fiscal contraction for the economy of 3.1% points, but this has subsequently been reduced to just 1.6% points. For 2013/14 the net fiscal contraction is now estimated at a very modest 0.2% points. In last year s budget, Australia s net debt position was forecast to peak at around $A144bn or 9.2% of GDP at June This peak has now been revised up substantially to $A191.6bn, or 11.4% of GDP, as at June Belinda Allen Senior Analyst, Economic and Market Research Stephen Halmarick Head of Economic and Market Research James White Senior Analyst, Economic and Market Research

2 However, in a global context Australia s fiscal position remains very strong and this is an important factor for both local and international investors. At an expected peak of 11.4% of GDP, compared to an estimated 93% of GDP in 2014 for the major advanced economies, Australia s government net debt position remains the envy of many other nations. Based on this budget, Australia s AAA credit rating looks to be under very limited pressure. Indeed, S&P have stated that the credit metrics (for Australia) remain supportive of the AAA sovereign rating despite the revised budgetary projections. The Budget contained a number of new spending and taxation measures and changes to the expected carbon price, which are all detailed below. But one of the aspects of the Budget that should be applauded is the focus on infrastructure. From 2014/15 to 2018/19 the government will spend an extra $A24bn on infrastructure. The focus of this spending will be on road, rail and ports. The Budget also states that the government will work with the private sector, establishing a new advisory function within Treasury to provide guidance on the most appropriate funding and financing structures to bring complex infrastructure projects to the market. The other main policies announced in the Budget are the new DisabilityCare Australia initiative and the National Plan for School Improvement. The DisabilityCare Australia policy will be funded by an increase in the Medicare levy on all taxable income from 1.5% to 2.0%, starting 1 July 2014 and lasting for a 10 year period. The money raised from this tax increase over the 10 years will be placed into the newly created Disability Care Australia Fund, which will be managed by the Future Fund. Money will eventually then be drawn out by the States to fund their responsibilities under the new Disability Care policy. In terms of the economic forecasts in the budget the government expects real GDP growth of 3.0% in 2012/13, slowing to 2.75% in 2013/14, before a slight improvement back to 3.0% in 2014/15. These forecasts look reasonable and are consistent with the RBA s forecasts published earlier this month. The primary sources of growth over this period are expected to shift from business investment towards household consumption, dwelling construction and net exports. The Budget s inflation forecasts are also consistent with the RBA s view, expected to be 2.25% in both 2013/14 and 2014/15. The unemployment rate is expected to drift only a little higher from 5.5% at June 2013 to 5.75% as at June 2014 and See below for further details. The 2013/14 Budget is likely to have very little impact on monetary policy considerations from the RBA. The fiscal contraction from the budget is much less than expected for 2012/13 and almost non existent for 2013/14. Both international and local investors will welcome the government s re-commitment to retaining the Commonwealth government securities (CGS) market at a size that maintains liquidity to support the three and ten-year bond futures market and that is of sufficient size to support the long-term stability of the financial markets. For 2013/14 the Australian Office of Financial management (AOFM) will need to issue around $A49bn in securities, little changed from the $A49.5bn now required for 2012/13. In the outyears the total supply of CGS on issue is now expected to exceed the current limit of $A300bn and so this limit will likely need to be increased. Equity markets are likely to be relatively unmoved by the Budget. There were no significant surprises, most programs and changes having been pre-announced. Some details: The 2013/14 budget deficit (underlying cash balance) of $A18bn or 1.1% of GDP is only marginally better than the 2012/13 estimated deficit of $A19.4bn or 1.3% of GDP, meaning the fiscal contraction the economy will have to wear over the next 12 months is relatively mild. For 2012/13 the deterioration in the budget deficit from an originally estimated surplus of $A1.5bn, to a MYEFO estimated $A1.1bn to latest estimate of $A19.4bn is mostly due to parameter changes, ie deterioration in the economy and or forecasting issues. For 2013/14, the expected surplus from the 2012/13 Budget was $A2bn, to a MYEFO estimate of $A2.2bn to a now estimated $A18.0bn. Once again, parameter changes, ie revenue falling short of forecast, was the overriding factor. In the years ahead, the Commonwealth continues to expect the budget to eventually return to surplus in 2016/17. The difference with 2013/14 Budget compared to 2012/13 is that revenue forecasts appear more realistic while there has been some attempt at improving outlays growth over the medium term. Act Bud. Bud. Bud. Bud. Bud. est. est. est. est. est. $Abn 11/12 12/13 13/14 14/15 15/16 16/17 Revenue % GDP Outlays % GDP Underlying balance % GDP Net debt % GDP Source: 2013/14 Commonwealth Budget.

3 While it is pleasing to see a surplus forecast in 2016/17, it would seem further policy measures will be needed to ensure this does occur. This is especially the case given the recent history of forecasting errors around revenue in particular, which is relying on nominal GDP growth returning to 5%, from its current rate of 2%. The chart below shows the expected path of the budget in the years ahead. At an expected peak of 11.4% of GDP, compared to an estimated 93% of GDP in 2014 for the major advanced economies, Australia s government net debt position remains the envy of many and provides Australia with significant policy flexibility for the future. General government net debt: Australia vs OECD nations: Commonwealth budget surplus/deficit estimates Source: Commonwealth Treasury, IMF Fiscal Monitor April Source: Commonwealth Treasury. While revenue forecasts do look slightly more realistic, the Budget notes that tax receipts have been revised down by around $A60bn over the four years to 2015/16 since MYEFO was published. This is a combination of lower company profits, capital gains tax, resource rent taxes, income taxes and consumption taxes. The revenue side of the budget remains subdued, although is expected to improve over the next four years. In 2013/14 the revenue share of GDP is forecast to be 23.5%, improving to 24.4% in 2016/17. Much of this is being driven by increasing the Medicare levy by 0.5% points and deferring the tax cuts associated with the carbon price rise which is now not forecast to occur. Revenue growth is expected to be 6.2% in 2012/13, rising to 7.3% in 2013/14 and then averaging 6.5% over the next three years. This compares to forecasts in the 2012/13 Budget of 11.3%, 7.0% and 5.2% respectively. In the out-years, the savings from some of the structural tax initiatives can be seen. Outlays are forecast to fall from 24.5% of GDP in 2013/14 to 23.8% in 2016/17 (helping to deliver the return to surplus), with cuts to the baby bonus and other structural savings helping the bottom line. General government net debt is now expected to peak at 11.4% of GDP as at June 2015, $A144bn or 9.2% of GDP at June Reflecting the move back to budget surplus, by 30 June 2017 net debt is now expected to have declined to $A185.7bn or 10.0% GDP. Key policy initiatives: Given the revenue shortfall detailed in the Budget, the government has been forced to outline a range of spending cuts and measures to increase taxes. This is deemed necessary, as the government is standing by its spending commitments to boost education, disability assistance and infrastructure spending. The most significant of these policies are as follows: Family: In the 2012/13 Budget, as part of the spreading the benefits of the boom package, the government announced that the Family Tax Benefit Part A (FTB-A) would be increased from 1 July This income boost, worth around $A300-$A600 a year for eligible families, has been axed, saving around $A2.5bn over the forward estimates. The baby bonus will be replaced with a means-tested payment. The $A5,000 payment for the first child will be replaced with a means-tested $A2,000 payment, with payments for subsequent children down from $A3,000 to $A1,000. The children's payments will be in the form of an increase in the FTB-A and will be means-tested to an income of around $A110,000 per year. Individuals: Prior to the release of the Budget, the Climate Change Minister stated that the government would defer $A1.4bn of planned tax cuts in 2015/16, to be funded by revenue from the carbon price scheme. This was confirmed in the Budget.

4 The tax cut was part of household assistance packages linked to the carbon tax, with the tax-free threshold slated to increase from $A18,200 to $A19,400 on 1 July The tax cuts worth around $A1.60 per week for people earning up to $A80,000 per year will be deferred until the carbon price exceeds $A the current projection for the carbon price has dropped to $A Business: Business was hit hard by this Budget. The tightening of the corporate tax system to remove erosion and loopholes (preventing profit-sharing), will contribute extra revenue of about $A4.1bn and $A219m in savings over four years. The research and development tax incentive will now only apply to companies with an annual aggregate turnover of less than $A20bn, saving the government $A1.1bn over the forward estimates. The government will scrap immediate deductions for large miners that purchase smaller miners that have undertaken exploration. This will save $A1.1bn over four years. $A500 million has been cut from the Carbon Capture and Storage Flagships program over the next three years. The Budget also extends the requirement to make monthly Pay As You Go (PAYG) income tax instalments announced in MYEFO to all large entities. Infrastructure: The government has committed to investing in infrastructure projects to expand capacity, reduce congestion and boost productivity by $A24bn over the coming 4 years. This represents new spending over the forward estimates of $A3bn. This will bring the Government s total investment in infrastructure to around $A60bn from 2008/09 to 2018/19. The government has committed $A3bn for the Melbourne Metro rail project and $A1.8bn for the construction of the WestConnex road project in Sydney's west. The WestConnex will include a 33km link between Sydney's west with the airport and the Port Botany precinct by building the M4 East and duplicating the M5 East to King Georges Road. A further $A400m will be allocated to Sydney s F3-M2 link and $A715m to Brisbane s Cross River Rail project. Other key projects were also announced in the other states. Health: The government is investing $A64.6bn in health funding, up 40% since the Labor Government came to power in Of this, the government will provide $A19.3bn over seven years for investment ($A14.3bn in new money) in the National Disability Insurance Scheme, now known as DisabilityCare Australia. This is considered the most significant social policy reform since Medicare. This will benefit up to 460,000 people with disabilities. This will be funded by a 0.5% increase (taking it to 2%) in the Medicare levy to be put in a special fund for 10 years. This will raise an expected $A3.3bn in its first year, then $A20.4bn between 2014/ /19. Workforce: The Budget announced $A1bn in investment to boost Australian innovation, productivity and competitiveness under A Plan for Australian Jobs. $A300m has been set aside to support jobseekers, including allowing Newstart recipients to earn more from paid work up to $A100 a fortnight from the current $A62 a fortnight, indexed from July $A300m will be spent on childcare reforms, including establishing a fund to help long day care providers acquire a highly qualified workforce. In terms of savings, $A270m has been removed from a program designed to support coal mining jobs. Deductions for work-related education expenses have been capped at $A2,000 from 1 July 2014, saving $A514.3 million over the forward estimates. Cuts to the public service over the forward estimates of $A580m have also been announced. Education: The Gonski school education reforms will be funded for six years from 2014/15, totalling $A9.8bn, increasing Commonwealth funding for schools to $A104.3bn from The government has announced several educationrelated savings measures to fund the Gonski education reforms, which require an extra $A6.5bn per year in expenditure. Prior to the Federal Budget, Treasurer Wayne Swan announced a further $A520m saving measure targeting tax deductions for self-education expenses. The amount that can now be claimed for study will be capped at $2,000 per year from July next year. Substantial savings in higher education total $A2.3bn, with universities required to make $A900m in efficiency

5 dividends (2% in 2014 and 1.25% in 2015) over three years. Moreover, the 10% discount given to students who pay their university fees up-front will be scrapped, saving a further $A230m. A further $A1.2bn will be saved by requiring students to payback start-up scholarship once they enter the workforce and earnings threshold is reached. Others policies: $A100m has been allocated on natural disaster mitigation to reduce insurance premiums. On the law and order front, $A64m will be spent on establishing a national anti-gang taskforce comprising 70 members of the AFP and state police. $A665m has been cut from the teacher s bonus over the forward estimates. Defence: $A113bn will be spent on defence funding over the forward estimates, up by $A10bn from last year's budget. In terms of foreign aid, the government has delayed reaching its spending target of 0.5% of gross national income for a second consecutive year, saving $A1.9bn. $A375m of current foreign aid investment will go towards asylum seekers in Australia, a figure which will be capped. Superannuation: From 1 July 2014, earnings of more than $A100,000 on superannuation pensions and annuities will be taxed at 15% instead of being tax free. The reform is expected to generate revenue of around $A900m over the forward estimates period. At an estimated earnings rate of 5%, the government expects the change will only affect people with more than $A2m in superannuation assets about 16,000 people in its first year. From 1 July 2013, people aged 60 and over will see increased concessional caps from $A25,000 to $A35,000. Excess concessional contributions will be taxed at the individual s marginal rate, plus an interest charge. This will mean individuals are taxed on excess concessional contributions in the same way as if they had received that money. The government will also appoint a Council of Superannuation Custodians to oversee the changes. Environment: The government has been forced to seek savings to offset an expected halving in revenue from the Carbon Price in 2015/16, when the three-year fixed price period ends and Australia links to Europe s ETS. The average cost of a basic packet of cigarettes will increase by 7 cents in the first half of The Budget and the economy: In terms of the economic forecasts supporting the budget, we see these as credible and largely consistent with the view expressed by the RBA in its most recent Statement on Monetary Policy on 10 May and by financial market participants. The Australian economy is set to grow at a bit below trend in 2013/14 and back to around trend growth in 2013/14. Like the RBA, the Federal Government is at pains to point out that the Australian economy is expected to undergo two large and important transitions over the forecast period ie from one of the largest investment booms in history to exceptional growth in production and exports and to nonresources drivers of growth. Economic growth is expected to be 2.75% in 2013/14 and 3.0% in 2014/15. This compares to RBA forecasts of between 2% and 3% in 2013/14 and 2.5%-3.5% in 2014/15. The RBA appears much more cautious in the current environment, with wide forecasting bands due to the uncertain domestic and global outlook. Australian economic growth actual and forecasts $A370m of funding for the Australian Renewable Energy Agency (ARENA) will be deferred, while $A225.4m will be deferred and $A32.3m redirected from the biodiversity fund. $A58m in funding for the Clean Technology Program has been moved to 2017/18. The funding for renewable energy research and development through an independent agency was a key part of the deal negotiated by the Greens through the Multi-Party Climate Change Committee in return for a lower carbon price. Source: ABS and RBA Statement on Monetary Policy May 2013.

6 In particular the Federal Government stresses the point that nominal GDP growth is forecast to remain subdued, reflecting the falling terms of trade, the impacts of a persistently high Australian dollar on company profits. The Budget is forecasting nominal GDP growth of 5% in both 2013/14 and 2014/15, below the 20-year average of 6.5%, up from 2% as at December This fall in nominal GDP is largely driven by an expected decline in the terms of trade in 2013/14 of 0.75% (after a 7.5% fall in 2012/13) and a further 1.75% fall in 2014/15. If anything these forecasts appear hopeful given recent falls and volatility in commodity prices. As expected, increases in supply of key commodities, particularly iron ore, from the investment boom should reduce commodity prices and the terns of trade over the next several years. Importantly exports are expected to grow by 6.5% in 2013/14 and 7% in 2014/15 as a number of key mining projects are completed and production begins. The Budget is forecasting moderate growth in household consumption over the next two years, as the economy shifts away from growth driven by the resources sector. Both interest rate cuts and an improvement in household wealth will be the key drivers. However there is clear recognition of weak growth in retail prices and the continued fall in the discretionary share of household expenditure. So while the consumer is looking stronger, an elevated savings rate is forecast to remain. Consumption growth is expected improve from 2.5% in 2012/13 to 3% in each of 2013/14 and 2014/15. Business investment over 2011/12 and 2012/13 has been the main driver of growth in the Australian economy and this is expected to moderate over the next two years. New business investment of 4.5% is expected in 2013/14 before slowing to 1% in 2014/15. Business investment is expected to peak at 19% of GDP in 2013/14. The government is forecasting the current pipeline of resources investment at over $A260bn, with total resources investment expected to peak at a record 8% of GDP in 2013/14. This is down from a pipeline of $A456bn in last year s Budget. Importantly the Federal Government is expecting non-mining investment to strengthen, however this remains yet to be seen given very low business credit growth and low business confidence. Residential investment is expected to recover, supported by continued low interest rates and favourable market fundamentals - including rising prices, high rental yields and low vacancy rates. Dwelling investment is expected to grow by 5% in 2013/14 and 5.5% in 2014/15. In particular favourable demographics should assist, however the real risk remains household appetite to take on additional debt as well as supply and cost constraints of new developments that are yet to be resolved. For the Australian economy to transition from mining to non-mining sources of growth, this pick up in dwelling investment must become a reality. There is slightly more optimism in relation to the labour market compared to last year s Budget, which focussed on structural change within the economy. Employment growth is forecast to remain moderate at 1.25% in 2013/14 and rising slightly to 1.5% in 2014/15, driven by improvement in the non-mining economy. This leads to an unemployment rate forecast of 5.75% by June 2014 and stabilise through 2014/15, these are roughly in-line with RBA forecasts. This will assist wages growth to remain contained over the next two years at 3.5%. Much of this is driven by a weaker labour market outlook and drift up in the unemployment rate. Private sector wages are set to grow at below its 10-year average and public sector wages growth is being constrained by fiscal consolidation at all levels of government. In terms of the inflation outlook, the government has forecast a very similar outlook to the RBA in its most recent Statement on Monetary Policy released on 10 May Headline inflation is expected to be 2.25% in 2013/14 (versus the RBA s expectation of between 2% and 3%) and 2.25% in 2014/15 (versus the RBA s expectation of between 2% and 3%). The Budget notes that inflation is likely to continue to be impacted from the high Australian dollar, subdued wages growth, but also more concrete evidence of a pickup in productivity growth, a clear positive. The current account deficit is expected to widen from 3.5% of GDP in 2012/13 to 3.75% of GDP in 2013/14 before narrowing to 3.25% of GDP in 2014/15 - with this profile mirroring changes in the trade deficit. The net income deficit is expected to remain constant at 2.5% of GDP. World GDP growth is forecast to grow by 3.25% in 2013 and 4.0% in both 2014 and 2015, with growth from the US and Emerging Asia the dominant force. In contrast, Australia s major trading partners are forecast to grow by a stronger 4.25% in 2013 and 4.75% in both 2014 and On the global economy, the focus on the outlook is downside risks stemming from the potential for a re-escalation of the euro area crisis and political risk in the US stemming from policymakers failing to raise the debt ceiling in a timely manner. Domestically the key risks to the economic forecasts are primarily for nominal GDP growth. This is of critical importance

7 for revenue forecasts for the Budget into the outyears. It is the uncertainty surrounding the transition from mining to nonmining sectors of growth as well as the persistently nature of the high Australian dollar that is most cause for concern. Domestic economic forecasts: Actual Estimate Forecast Projections 2011/ / / /15 GDP %yr Nominal GDP %/yr GNE %yr Net exports % cont. Terms of trade %/yr Current acc. % GDP Business investment %yr Unemployment rate % at June CPI %yr Wages %yr Source: Commonwealth Treasury. Bond market implications and debt selling task: When calculating the borrowing requirement of the AOFM it is the headline budget numbers that need to be used. These headline deficits are larger across the outyears than the underlying deficit, as they incorporate other capital spending items. For 2012/13 it is estimated that the AOFM will issue a total of $A49.5bn in gross debt, made up of $A53.7bn in Treasury bonds and $A3.3bn in Inflation linked bonds, offset by a $A7.5bn reduction in Treasury Notes. Commonwealth borrowing needs and supply As at June Budget deficit Maturities Additional funding Total debt needed Funded by: Nominal bonds Indexed bonds T-Notes Total securities on issue*: Source: RBA, AOFM and First State Investments. * Includes T-Notes, Indexed and nominal bonds We now estimate that total CGS on issue (including nominal and inflation-indexed bonds and T-notes) will be around $A284bn as at June 2014, up from an estimated $A257bn at June Total CGS on issuance is expected to continue to rise (given the Headline budget deficits) right across the 4 year forecast period, moving to $A313.5bn at 30 June 2017 the chart below shows details. It is also worth noting that Australia s debt ceiling is currently set at $A300bn. This level is likely to be breached in the years ahead and we note that the budget states that the government will legislate to increase the limit as it becomes necessary. Commonwealth securities on issue, actual and projected This is well up on the estimate this time last year of a $A32bn funding requirement. After taking into account maturities, net Treasury bond issuance in 2012/13 is now estimated at $A28.1bn, well up on the previous estimate of $A9bn. For 2013/14 the total borrowing need of the government is estimated at $A49.0bn, ie. little changed from 2012/13. Treasury bond issuance is estimated at $A50bn, with Inflation linked issuance to rise to $A4bn in the year ahead. Treasury note issuance is expected to fall to zero by the year end. In net terms, Treasury bond issuance is now estimated at $A27.4bn. The following table provides details. Source: Commonwealth Treasury and First State Investments. Equity market implications: Equity markets are likely to be relatively unmoved by the Budget. There were no significant surprises, most programs and changes having been pre-announced. The 2013/14 Budget has delivered a small hit to the Australian consumer, through the rise in the Medicare levy and reduced payments for FBT (A) and the baby bonus.

8 However, the most recent interest rate cut from the RBA and the expectation for a further easing does have the potential to see consumer sentiment bounce in coming months. There was evidence that consumer sentiment had fallen in the wake of discussion around the Budget due to questions over the Budget s sustainability and the threat of higher taxes. The Budget, however, has not led to a substantial rise in taxes and as a result could come as some relief for households. The increase in government investment in roads, to $A24bn to 2019, will offset some of the decline in the strong period of mining investment, though this is unlikely to be sufficient. The closing of some loopholes for corporate taxation will not substantially impact the profitability of Australian listed companies. Most of the corporate tax measures are directed at offshore parent companies. It is estimated that the loopholes account for, at most, a 0.5% fall in the earnings of ASX100 companies. The changes to the tax treatment of both exploration and Research and Development will similarly raise very small amounts from those companies that are impacted. The tax change applies to companies with a turnover in Australia of greater than $A20bn per year; this accounts for just 11 ASX100 firms. The changes to the superannuation regime were preannounced. This has led the market to already discount the changes. It is, however, clear that the changes were less substantial than once thought. However, while these changes are considered a fairly minor negative, they may constrain medium-to-longer term growth in superannuation assets. The government announced a number of policies earlier. From a listed Australian healthcare company perspective, some healthcare companies may also benefit from the increase in funding to the Pharmaceutical Benefits Scheme (PBS). However, the Medicare savings will negatively impact upon medical centres: adversely impacting listed healthcare providers. Overall, the Budget outlines a relatively sustainable path for Australian government finances without increasing the burden of tax on households and firms substantially. As such, it might be relatively supportive of short-term confidence in the equity market. Disclaimer The information contained within this document is generic in nature and does not contain or constitute investment or investment product advice. The information has been obtained from sources that First State Investments ( FSI ) believes to be reliable and accurate at the time of issue but no representation or warranty, expressed or implied, is made as to the fairness, accuracy, completeness or correctness of the information. Neither FSI, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from any use of this document. This document has been prepared for general information purpose. It does not purport to be comprehensive or to render special advice. The views expressed herein are the views of the writer at the time of issue and may change over time. This is not an offer document, and does not constitute an investment recommendation. No person should rely on the content and/or act on the basis of any matter contained in this document without obtaining specific professional advice. The information in this document may not be reproduced in whole or in part or circulated without the prior consent of First State Investments. This document shall only be used and/or received in accordance with the applicable laws in the relevant jurisdiction. In Hong Kong, this document is issued by First State Investments (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. First State Investments is the business name of First State Investments (Hong Kong) Limited. In Singapore, this document is issued by First State Investments (Singapore) whose company registration number is D. First State Investments (registration number B) is the business division of First State Investments (Singapore).