Blessed with ample natural resources, stable government (relatively speaking!), sound banking and corporate regulation, and strong demand for our exports, the Australian economy is expected to continue growing while its developed world peers are struggling by with little economic growth.

However, it seems that investors are yet to recognise the importance of Australia’s major trading partners, choosing instead to focus their daily share trading patterns on developments in the United States.  While that economy has in the past been important to Australia, the 1990’s and beyond has seen the Australian economic growth linked more closely with that of China, India and other south-east Asian countries.  The reliance on the US economy by Australia now seems to be history, and the outlook for the Australian share market is looking positive.                                                                                

Valuations in the Australian corporate sector remain attractive, with profits expected to growth significantly in the 2011 financial year.  The positive outlook is not across the board, with domestic consumer-reliant industries likely to feel the brunt of the Reserve Bank of Australia making pre-emptive strikes against inflation.

Investors taking a medium to long term view can use current weakness in the share price of quality businesses to acquire those shares at an attractive discount to their fair value.  The share market is not efficient, and good value abounds in Australian stocks.