Investors had plenty to smile about in 2017, despite a world of worries on the geopolitical stage from the Middle East to North Korea and the South China Sea. The global economy continued its steady improvement and financial markets produced some excellent returns.
Australia’s economy grew by 2.8% in the year to September, marking 26 years without a recession. The biggest contributor was private sector investment as business profits posted their strongest gains in 15 years. Low interest rates and low inflation of 1.8% remain supportive for business and consumers. Unemployment fell to 5.4 %, the lowest jobless rate in four years, but sluggish wage growth remains an issue for the Reserve Bank.
There is every reason for cautious optimism in the year ahead, although there are risks too.
Local economic growth is on track, interest rates are likely to remain low for some time yet and first home buyers have their best chance in years to get a toehold in the market. Australian shares look fair value although global equities are likely to continue to provide higher returns.