• The benchmark S&P/ASX200 index closed 25% higher over the 2020/2021 financial year, marking a new record after the coronavirus pandemic wreaked havoc nationwide.
• Listed companies were buoyed by rock-bottom interest rates, fiscal supports, and vaccine optimism through the end of 2020.
• Analysts expect the market party to continue, but not at the same phenomenal rates.
• Visit Business Insider Australia’s homepage for more stories.

The Australian share market capped off a remarkable financial year on Wednesday, with the benchmark S&P/ASX200 index closing nearly 25% higher over the past twelve months, its most significant financial-year gain since its inception in 2000.

The ASX200 closed at 7313 points, marking a rise of 0.2 points over the day, 2.1% over the month, and a mammoth 5934.4 points above market open on July 1 last year. The broader All Ordinaries index also rose 26.4% over the financial year, CommSec states, representing the largest spike in its 34-year history.

The Australian market shrugged off apocalyptic predictions from the start of the coronavirus pandemic to recover strongly in the latter half of 2020. Many firms which originally put their hand out for JobKeeper subsidies wound up recording record profits, suggested many businesses would not just survive the year, but thrive.

Buoyed by rock-bottom interest rates, remarkable Commonwealth fiscal support, and easing lockdown conditions across much of Australia, that growth continued through the first half of 2021, despite snap lockdowns constraining corners of the Australian economy.

CommSec states overseas developments like the rapid creation of COVID-19 vaccines, massive stimulus packages in the U.S., and that nation’s smooth transition of power to the Biden Administration provided further confidence to local markets.

That business sentiment appears inversely proportional to the current mood of broader Australian society, which is facing the most widespread lockdown actions in many months. But the good times will continue to roll on the markets, analysts say, albeit at a somewhat less vigorous rate.

CommSec forecasts the ASX200 arriving at 7,350 points in December 2021, and 7,475 points at the close of this new financial year, under the assumption the current lockdown measures and its knock-on effects don’t weigh too heavily on the nation’s unreal economic recovery.

The Reserve Bank of Australia may force the market’s hand if it moves to pull the interest rate from 0.10% earlier than it has predicted — and the Commonwealth Bank believes it could do so, suggesting rates could be lifted not in 2024, but as early as November 2022.

“We also have to deal with a situation where if we continue to do well, both here in Australia and abroad, then we start to talk about opening up the economy, we start to talk about the fact that interest rates may rise at some point,” CommSec chief economist Craig James said.

“Once we get into 2022, I think we’ll start to get more into that debate. We’re looking for the share market to move higher over the next twelve months, but certainly nowhere near the sort of pace that we’ve done over the past twelve months.

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