The extraordinary performance of small industrial companies listed on the Australian Stock Exchange in recent times appears to have turned around – but at the same time, small resource companies are outstripping the overall market.

“Canny investors will know that over the longer term, small-cap companies are the breeding ground for future leaders and can strongly outperform large stocks.”However, the wide range of performance differences between companies again emphasises the value of stock selection in today’s volatile market.”

Best performing caps in the small  caps market Apr-June09

Aditya Birla  549%

Pacific brands 403%

Alesco 347%

Macquarie Countrywide 312%

Macquarie DDR 297%

Ing Industrial 290%

Tishman Speyer 284 %

Lynas 282%

Bradken 265 %

Stock market investors have had a rough time in australia over the past few months. Those who have opted for shares in large, well-established companies such as banks, leading retailers such as Marks & Spencer and utility stalwarts such as BT have been among the worst hit. Instead of receiving the steady returns they had been accustomed to, investors have seen their dividends – and in some cases their capital – slashed to ribbons and even wiped out.

The forecast deficit for the fiscal year ending June 30, 2010, is 4.9% of gross domestic product, which would be larger than deficits in Australia’s two previous recessions in the early 1980s and early 1990s. It would also be almost double the current fiscal year’s deficit forecast of A$32.1 billion

The government expects China, Australia’s biggest trading partner, to emerge from a slowdown to once again boost the Australian economy. The government said that a return to double-digit growth in China is unlikely anytime soon, but China can be expected to grow by 8% in 2010 and 8.5% in 2011.

Melinda Cilento, chief economist at the Business Council of Australia, told Business Spectator that the budget takes important steps towards repositioning Australia.

Ms Cilento said the budget correctly targets infrastructure spending rather than cash handouts, but warned that the government will have to back up the measures with tough successive budgets.