Published on August 21, 2014
Kate Zwar Commerce Investment Climate over the last 7 years: The investment climate is the conditions which influence the performance of investments. Over the last 7 years the Australian investment climate has changed substantially due to a number of reasons. One of the major factors in the changing investment climate is the ‘resource boom’. The resources boom was a strong global demand for commodities (e.g. coal, iron ore, minerals) and Australia is one of the world’s largest producers of commodities. Since around 2005 there has been a strong demand from Asia and china in particular for our resources which brought a lot of wealth into the Australian economy and high employment. This resulted in a boom period where people are optimistic and likely to invest. Therefore the share market experienced highs (bull market). Starting from around the same time as the resource boom the Australia dollar has risen substantially. The rise of the Australian made it more attractive to invest in overseas shares or property. However in recent years the Australian dollar has decreased in value. Another major factor to the investment climate over the last seven years was the impact of the Global Financial Crisis. The Global Financial Crisis (GFC) was a collapse of the stock market and the failure of some large financial institutions. The effect of this on the investment climate was that the value of an investors share portfolio decreased. The return on shares also decreased resulting in a bear market and loss of investor confidence in the share market. Besides investing in the share market, the other major form of investment is the property market. Over the last seven years the prices of property in major cities (Sydney, Melbourne, Brisbane and Perth) in Australia has increased substantially. The demand for properties increased due to rise in population, overseas investors interested in buying in Australia and falling interest rates particularly during and post GFC. All of these factors affect the demand for property. Finally the current investment climate continues to have a strong demand for property due to appeal of Australian property to overseas buyers and low interest rates that encourage investments for borrowers. The climate for the share market currently depends on the world’s economy and the decreasing risk of recession in the world’s largest economies.