STRONG economic growth continued in 2000 despite the introduction of the GST on 1 July. The Reserve Bank increased official interest rates by 1.25 per cent over the year in an attempt to maintain moderate growth and to keep inflation within their target rate. There is a hint of a slowdown in 2001 and interest rates are likely to fall in 2001. Markets at the end of the year factored in this slowdown and as a result, the bond market improved strongly.

The stock market saw a sell-off in technology stocks during the year with a further more general sell-off on the last day of the year. As a result the All Ordinaries Index increased 1.7 per cent during the year. Overseas markets fell but the effect was cushioned to some extent by the falling Australian dollar. The exchange rate weakness is of real concern to the University as it directly affects the cost of journals, books and scientific equipment.

The University’s short-term funds, which have a substantial exposure to bonds, benefited from the bond rally and showed a return of 8.0 per cent. The long-term pool, with its large exposure to equities, distributed 6.8 per cent.

Property markets improved with vacancy levels falling in all capital cities. The University’s endowment portfolio performed in line with forecasts. Following a change to the Endowment Act the opportunity will be taken to reposition this portfolio.

The year also saw the introduction of the GST. Although the University is largely exempt, a number of activities do attract the tax and this has resulted in additional administrative effort. As items such as motor vehicles were previously sales tax exempt it is likely that change-over costs will increase. It will be necessary to investigate the optimal holding period for vehicles and other items of equipment.

The Government has announced that charitable institutions, which are understood to include universities, will receive a refund of franking credits. This measure could add 1.0 to 1.5 per cent to the return of Australian equities.