2020–21 year in review: A dramatic recovery

The Australian economy has experienced fire and rain in more ways than one over the past 18 months.

After plunging into its first recession in 28 years in 2019–20 as COVID-19 hit fast on the heels of bushfires, floods and drought, in 2020–21 Australia’s economy staged an emphatic V-shaped recovery.

The strength of the recovery was due in part to Australia’s success in suppressing the pandemic compared with most other developed nations and the speed and size of the financial stimulus from state and federal governments and the Reserve Bank.

But the recovery also owed much to strong Chinese demand for our iron ore and booming prices for a wide range of commodities. This, coupled with growing consumer confidence, falling unemployment, low interest rates and high levels of cash in search of a home, produced a surge in asset prices from Wall Street to the backstreets of the Australian residential property market.

What does all this add up to for local investors? The proof is in the superannuation pudding, with the median growth fund expected to show an annual return of around 18% for the 12 months to 30 June. This follows a dip into the red the previous financial year.

Indeed, Australia’s biggest super fund, AustralianSuper recently reported an annual return of 20.43% for its Balanced option, the highest in the option’s 35-year history.

As you can see from the table below, asset prices have been on a roll – with the notable exception of bonds, where prices fall as yields rise. Here’s how the year unfolded.