CommSec Financial Year Wrap

EOFY Series: The Australian sharemarket

CommSec Senior Economist Savanth Sebastian takes a look back at the performance of the Australian share market over the 2016/17 financial year. Over the year, the ASX 200 index rose 9.3%, while total returns on Australian shares rose 13.1%.

In Review 2016/17: Remarkable for being unremarkable

Total returns on Australian shares (All Ordinaries Accumulation index) came in at 13.1 per cent over 2016/17 (20-year average +10.8 per cent) – the best gain in three years.

The Australian dollar has tracked a US6.25 cent range against the greenback over the year – the least volatile year in 27 years. The Australian sharemarket has had the least volatile year in 16 years.

·       The 2016/17 financial year is now complete and it is an opportune time to see how investments, financial markets and economies have performed over the past year.

·       Overall, the year was remarkable for being unremarkable. At least as far as the economy and financial markets performed. The year started with the fall-out from Brexit. There was a domestic election and the US Presidential election. In 2017 there has been a raft of elections in Europe. And there was the OPEC production agreement.

·       But despite the challenges, returns on shares and residential property lifted over the past year while interest rates are lower and the Aussie dollar is little changed from a year ago. In fact the Aussie dollar has tracked a range of US6.25 cents – the least volatile year in 27 years. The sharemarket has had the least volatile year in 16 years. And the record (and world-leading) Australian economic expansion continues.

·       The economy has grown by around 1.75-2.00 per cent in 2016/17 and we expect growth of around 3.0 per cent in 2017/18. Infrastructure will be a key driver of growth in 2017/18 alongside exports, while home building continues, especially in Sydney, Melbourne & Brisbane. Underlying inflation may lift from 1.7 per cent to 2.0 per cent over the coming financial year while unemployment may ease modestly from 4-year lows of 5.5 per cent currently to the 5.0-5.5 per cent range. Official interest rates may remain on hold for another year.

·       It is clear that Australia is well placed. Inflation is under control; interest rates are at record lows, the Aussie dollar is supportive and the record expansion continues.

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