The Australian Market
This firm international standing is reflected in the fact that Australia’s three largest trading partners – China, Japan and the United States - are also the three largest economies in the world; and its two largest investment partners - the US and UK – are home to the world’s largest capital markets.
Such solid trade and investment relations have helped see real economic growth average 3.0% per annum over the past decade, positioning Australia as one of the stronger performers among developed countries during the period.
Australia’s steady economic growth has also been aided by a resources boom that has seen its economy emerge as one of the largest global suppliers of raw materials (coal, iron ore, etc). This fertile resources sector makes up around 9.6% of Australia’s total economy, with the remainder being comprised of financial services (11.0%), manufacturing (9.1%) and construction (7.7%).
This distribution broadly mirrors that of the Australian equity market, with the largest sectors being financial services (32%) and resources (31%).
Australia is also home to a well-developed, innovative and highly-regarded financial services industry and capital market, including:
- Financial development - Australia was ranked 5th out of 57 of the world's leading financial systems and capital markets by the World Economic Forum;
- Equity market - the 8th largest in the world (based on free-float market capitalisation) and the 2nd largest in Asia-Pacific, with A$1.2 trillion market capitalisation and average daily secondary trading of over A$5 billion a day;
- Bond market - 3rd largest debt market in the Asia Pacific;
- Derivatives market - largest fixed income derivatives in the Asia-Pacific region;
- Foreign exchange market - the Australian foreign exchange market is the 7th largest in the world in terms of global turnover, while the Australian dollar is the 5th most traded currency and the AUD/USD the 4th most traded currency pair;
- Funds management - Due in large part to its compulsory superannuation system, Australia boasts the largest pool of funds under management in the Asia-Pacific region, and the 4th largest in the world.
Spurred by its healthy political and economic position, Australia has become an attractive investment destination for global investors as well as home to many major multinational financial services providers. With a diverse investor group comprised of 40% foreign investors, 40% domestic institutional investors and 20% retail investors, the Australian equity market is well placed in the global economy.