To mark its 20 year anniversary today, Australia’s largest retail share trading platform, CommSec, has undertaken an in depth review of economic developments and the evolution of share trading in Australia over the last two decades.
Over the past 20 years, consumer prices have increased by 67 per cent yet the average wage has more than doubled – lifting by 128 per cent from around $33,000 to $77,000. This has translated into increased purchasing power as the relative cost of essentials including food, clothing, household goods and transport have all fallen over time.
Interestingly, while the average wage has substantially increased, wealth has more than tripled, largely driven by higher returns on shares and property. Per capita wealth stood at almost $97,000 in 1995 compared to in excess of $340,000 today.
In 1995, the population was around 18 million and the Australian economy was still in recovery mode after the early 1990s recession, with annual economic growth just below 3 per cent. In contrast the present rate of growth is slower than the ‘normal’ pace, sitting at 2.3 per cent.
In 1995, interest rates were high compared to current levels due to high inflationary pressures, as the cash rate was aggressively lifted from 4.75 per cent to 7.5 per cent between August and December 1994 and stayed at this level until July 1996. The rate of underlying inflation remains at the same level of 2.3 per cent as it did twenty years ago.
The Australian dollar was hovering around US73 cents when CommSec was established, and now it’s approximately US74 cents.
On 17 July 1995, Commonwealth Securities, now known as CommSec, entered the market with the primary aim to make share trading accessible and affordable for retail investors.
Paul Rayson, Managing Director, CommSec, comments: “The Australian sharemarket has grown significantly over the past 20 years and has been a major source of wealth creation for self-directed investors. The emergence of online broking has provided retail investors with direct market access and a broad suite of market information, research, tools and insight at an affordable price. CommSec is proud of its role in developing the online broking market in Australia and helping retail investors invest online with confidence.”
Craig James, CommSec Chief Economist, said: “It’s interesting to reflect and compare the financial evolution of Australia over the years, what has changed and what has been achieved. In the case of Australia’s key economic and financial indicators, the exercise is a very positive one.
“In 1995, the market capitalisation of the Australian sharemarket was $299 billion - now the value sits at $1.7 trillion. Total private direct share ownership in Australia in 1994 was 16 per cent of the adult population or 1.98 million Australians. Today, share ownership has risen to 33 per cent or 5.94 million investors.”
The index of total returns on shares (All Ordinaries Accumulation index) is six times higher now than 20 years ago. In terms of share price indexes, on 17 July 1995, the All Ordinaries index stood at 2,104. The most recent record high was set back on 1 November 2007 with the All Ordinaries closing at 6,854. The closest the sharemarket has been able to get to this closing high in the past few years was 5,955 for the All Ordinaries on 27 April 2015.
In late 1995, the fore-runner of BHP Billiton, the Broken Hill Proprietary Company (BHP), was the largest company on the Australian sharemarket. There were three mining companies in the top 10 companies with four banks, a media company, a paper manufacturer and soft drink producer. In 2015, there are now five banks in the top 10 companies, one mining company, one telecommunications company, one supermarket retailer, one biotechnology company and one conglomerate (Wesfarmers).
If you would like to view further analysis you can visit the CommSec website at www.commsec.com.au/20years.
Australian Bureau of Statistics; The Australian Share Ownership Study, ASX, 1994; The Australian Share Ownership Study, ASX, 2014; and the Reserve Bank of Australia.
This media release is approved and distributed in Australia by Commonwealth Securities Limited ABN 60 067 254 399, AFSL 238814 (CommSec) a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124, AFSL 234945 (the Bank). This economic report does not provide a recommendation to buy, sell or hold any securities, property, real estate or financial products, and has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. For this reason, any individual should, before acting on the information in this report, consider the appropriateness of the information, having regard to the individual's objectives, financial or taxation situation and needs and, if necessary, seek appropriate professional advice. Past performance, economic or otherwise, is not a reliable indicator of future performance. This report is produced by Commonwealth Securities Limited based on information available at the time of publishing. We believe that the information in this correspondence is correct and any opinions, conclusions or recommendations are reasonably held or made as at the time of its compilation, but no warranty is made as to accuracy, reliability or completeness. To the extent permitted by law, neither the Bank nor any of its subsidiaries accept liability to any person for loss or damage arising from the use of this media release.