The outlook for the Australian economy is really good. The earnings season turned out to be the best in the last decade, thus providing a base for the stocks to achieve new highs.

According to the Commonwealth Bank of Australia, a greater proportion of S&P/ASX 200 Index components were in the green since 2010. According to Bloomberg, around 69% of the companies raised their dividends during the earnings period as the focus is now on rewarding shareholders than retaining the money for investments.

The narrowing current account deficit is one of the factors for a bullish take on the Australian economy. The gap between Australia’s overseas earnings and payments to foreigners fell to $3.9 billion. Data released on Mar 1, 2017 show that Australia narrowly dodged recession by growing 1.1% in the last quarter of 2016.

Australia’s terms of trade, the ratio of the nation’s export prices to its import prices grew 9.1%, owing to strong price increases in coal and iron ore.

According to the Chief Economist of Deutsche Bank, Adam Boyton, the current scenario in the Australian economy could drive the Australian Dollar to the north of 80 cents per US dollar, which hasn’t happened since May 2015.

Hence, the overall confidence in the Australian economy makes us look out for the following ETFs:

IShares MSCI Australia Index Fund (EWA - Free Report):

This fund is the most popular Australian ETF in the space, offering exposure to the most liquid equities in the Australian economy. Considering the fact that this fund manages an AUM of $1.7 billion and charges a relatively moderate fee of 49 bps, it can be a great bet for investors looking to go long on the Australian economy with relatively less risk.

This fund tracks the market cap-weighted MSCI Australia Index. The fund is heavy on Financial Services (43%) and Basic Materials (15%). It has a dividend yield of 4.01%. The fund offered a 9.05% return year to date and a 32.76% return over the last one year. As such, EWA currently has a Zacks Rank #1 (Strong Buy) with a Medium risk outlook.

WisdomTree Australia Dividend Fund (AUSE - Free Report):

This ETF is another such fund offering exposure to the Australian economy. The top two holdings are Financial Services (24%) and Basic Materials (22%). Rising commodity prices make this a good investment. More importantly, considering the recent boost in dividends across the companies on S&P/ASX 200, a dividend weighted ETF like AUSE is a great bet for investors focusing more on current income. Investors must note that such a strategy might tilt the scales in favor of sectors with higher distributions.

This fund tracks the WisdomTree Australia Dividend Index. Managing an AUM of $36.5 million with an expense ratio of about 58 bps, it is relatively less concentrated (with 32% in the top 10 holdings) compared to other popular ETFs offering similar exposure. It has a dividend yield of 3.28%. The fund offered an 8.28% return year to date and a 35.15% return over the last one year. As such, the fund currently has a Zacks Rank #2 (Buy) with a Medium risk outlook.

SPDR MSCI Australia Quality Mix ETF (QAUS - Free Report):

The top two holdings of this fund are Financial Services (33%) and Real Estate (15%). This fund tracks the MSCI Australia Quality Mix A-Series Index, which is an index of Australian securities derived from three sub-indexes based on one of three factors: quality, low-volatility, and value. Each sub index receives equal weight.

The fund is highly concentrated with more than 50% assets in the top 10 holdings and manages AUM of $11.9 million. It has a low expense ratio of just 30 bps. It has a dividend yield of 4.13%. The fund offered a 7.90% return year to date and a 27.60% return over the last one year. As such, the fund currently has a Zacks Rank #1 (Strong Buy) with a Medium risk outlook.

Bottom Line

Owing to above average profit increases, dividend distribution increases and narrowing current account deficit, the outlook for the Australian economy has become quite bullish. As a result, gaining exposure to the Australian economy may turn out to be good option now. Therefore, allocating portfolio assets to the above mentioned ETFs can prove to be a good return enhancer.