According to the 2017 Australian Financial Markets Report, the financial services and insurance industry enjoyed a period of 4.5 per cent growth despite being weighed down by “a subdued growth, inflation and volatility environment”.
In comparison, the Australian economy as a whole only grew by 1.8 per cent, the report pointed out.
“In a year of below trend economic growth, Australian financial markets have remained very important as the largest industry in the market sector of the Australian economy,” commented Australian Financial Markets Association (AFMA) economist Stephen Kirchner.
The S&P/ASX 200 price index saw a capital gain of 9.3 per cent over the financial year, with the corresponding total return index up by 14.1 per cent.
The overall value of listed Australian shares rose as well, up by 9.6 per cent from $1.62 trillion to $1.78 trillion.
“That was a significant lift on the lacklustre performance of the previous financial year; although with a year-end index value of 5,721, the market was still left trading well below its all-time highs,” the report said.
AFMA chief executive David Lynch said that the market had done well in a year tinged by uncertainty.
“Australian financial markets have remained healthy against an uncertain international political backdrop as well as significant domestic changes,” Mr Lynch said.
Indeed, the report said that the year had seen “significant ebbs and flows”, with the market struggling with “local company profit downgrades and weaker economic conditions”.
“Geopolitical uncertainties” also rocked the market, with the election of US President Donald Trump “initially disconcert[ing] equity investors”; post-GFC lows were still reverberating in capital markets; and initial public offerings had dropped “by about a third for the year, to $15 billion”.
Though business confidence rose, along with an improving labour market and “ongoing health in the Australian housing sector”, the corporate sector had found itself in an increasingly isolated environment.
“From a regulatory point of view, the swing of the political pendulum away from capital and the establishment, and towards populism and labour — which was beginning to emerge in 2015–16 — gathered momentum through 2016–17,” the report said.
This culminated “spectacularly in an arbitrary and unexpected major bank levy in the May federal budget”.
“Comments by the federal Treasurer, with reference to the banks, that ‘they (customers) already don’t like you very much’, epitomised the newly unsympathetic tone in government/corporate relations,” the report said.