Two ETFs To Play An Improving Australian Economy

australian-flagAustralia has enjoyed economic expansion for almost 20 years now. Before the global financial crisis hit the country, Australia was in a decent situation financially, thanks mainly to its extensive reserves of natural resources and effective governance. The economy grew at an average annual rate of 3.8% during 1995-2004.

Australia’s Reserve Bank slashed interest rates to record lows in response to the intensifying financial crisis. The nation came through the global recession relatively unscathed. However, stimulus spending schemes by the Labor government led the country into deficit. (Read: Time to Buy the Australian Dollar ETF?).

What’s happening now?

For a long period the economy experienced sturdy growth, but the growth in recent times has been more sluggish. This is mainly due to a fall in iron-ore demand from the country’s largest importer China.

While some analysts still fear that the economy may crash, we received some good news on the economic front. The Australian economy recorded moderate growth in the first quarter; however with the Q2 results in place the country is slowly picking momentum.

According to the Australian Bureau of Statistics, GDP rose 0.6% in the second quarter, from the previous quarter when it rose 0.5%. This marks 22 years of consecutive growth for the Australian economy. The IMF expects the economy to expand by 3.0% and 3.3% in 2013 and 2014.

Can Tony Abbott’s Presidential Election attract investors?

Mr. Abbott has ended the six years of rule by the Labor party led by ex-president Mr. Rudd. With Mr. Abbott taking the seat, his top priorities include expanding infrastructure, reducing government spending, abolishing tax on carbon emissions and mining and restricting the flow of asylum seekers.

The new administration has also promised some tax incentives to the mining industry as well as manufacturers. This in turn could bring in more business opportunities in the country and help the big miners. Given Abbott’s presidential victory, and his pledge to the Australian economy, investors are likely to take advantage of the situation.

Investor Options 

Investors who wish to place their bets in the improving economy of Australia may play the ETFs listed below:

iShares MSCI Australia Index Fund (EWA)

Investors might find iShares EWA an interesting choice to play on Australia. Launched in March 1996, the product has amassed a huge asset base of $1.96 billion.  It is the oldest and the most popular ETF in the region with a focus on large caps. The fund seeks to replicate the performance of the MSCI Australia Index, before fees and expenses.

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