Australia is known as one of the most robust economies in the world. Since 1980, the country has transformed itself into an international export-leader and high-tech steamroller. Steady annual economic growth for 28 years in a row makes Australia an attractive and safe environment for international investments.
Australian economy outlook
The country has been resilient to the global economic crisis of 2008. Australian employment rates and economic performance rose. As the world’s 14th largest economy, Australia provides to be a rather low-risk and stable economy to do business and is ranked AAA by the global rating agencies.
The Australian market is also characterized by low government debt, as well as diverse technology and services sectors.
The country has achieved global success in 5 major industries, including: energy and resources, financial services, education, tourism and agricultural business. The country enjoys a well-educated, multicultural and multilingual workforce, which drives innovation and greatly contributes to the development of startup ecosystem.
Why invest in Australia?
Australia is regarded as a globally integrated and open economy, making it the destination of choice for many investors and traders. 9 out of 10 top companies from the list of Fortune Global 500, and 8 out of 10 companies from the list of Forbes Global 2000, operate businesses in Australia.
Australia’s top business partners are China, Japan, the USA, Korea and India. The country’s free trade agreements help the country to achieve a smooth flow of investments, services and goods with the world’s top economies. Australia’s highly competitive market environment contributes to further vibrant economic development.
Australian stock exchange
The Australian stock exchange (ASX) is one of the world’s leading financial markets, ranked #5 among the top global exchanges. The total market capitalisation of the ASX is $1.9 trillion.
The history of ASX exchange goes back to 1788, although the Australian Stock Exchange as we know it today was established in 1987. Today, the exchange offers a full stack of services, including listings, trading settlement and clearing. Positioning itself as a customer-driven venture, the company attracts 2,200 listed companies and 6.7 million share owners.
Australia 200 index
One of the easiest ways to invest in the Australian share market is through CFDs on its key national index. The Australia 200 index, also known as the S&P/ASX 200, serves as a major benchmark for Australian stock market performance. The index consists of 200 high-profile stocks listed on the ASX, which account for almost 82% of the Australian stock market capitalisation.
The index was launched in March 2000 with a base value of 3,133.3. The latest Australia 200 price as of 25 July 2019 was 6,814.2.
Over the last 12 months, the S&P/ASX 200 has experienced some highs and lows, but the latest strong months helped to achieve a 7.1% growth. This is considered a strong gain, but individually some stocks have performed even better.
The top Australian stock market performers in FY 2019 are: Nearmap (+233%), Clinuvel Pharmaceuticals (+206%), Afterplay Touch Croup (+168%), Magellan Financial Group (+119%) and Appen (+109%).
Benefits and risks of investing in the Australian stock market
One of the most promising and attractive markets from an investor’s perspective, Australia has its own pros and cons. Australia has managed to build a highly competitive business and investment environment. Its close ties with rapidly growing countries and stable politics have helped it to expand rapidly, outpacing other developed countries, including the US, the UK and other EU countries.
The benefits of investing in Australia:
- A stable economic position. Australia ranks high for its economic efficiency and political stability.
- Strong legal frameworks. Australia has solid corporate governance laws and ensures effective intellectual property protection.
- Geographical location and natural resources. Australia is the leading producer of coal and iron ore.
In spite of all the pros of Australia, as an attractive investment hub, there are also a few drawbacks.
The risks of investing in Australia:
- High reliance on commodities. To a large extent, Australia’s growth depends on Chinese demand for natural resources.
- Increasing taxes. Australia is negotiating implementation of resource and carbon taxes. These taxes may raise the operational costs for many companies in Australia.
In the end
Australia is a strong economy, which is capable of avoiding many problems faced by other developed nations. Its geographical proximity to the major Asian emerging markets and strong commodity prices ensure its further growth for the years ahead. The country’s safe and reliable business environment makes it a very attractive destination for foreign investments.