The Australian share market rallied 6.3% (S&P/ASX 200), the strongest monthly performance in almost five years – since October 2011.

Markets decided that Britain’s vote to leave the European Union would not derail the global recovery, after the vote in late June had initially sent European, US and local shares sliding. However, the British pound remains below its pre-Brexit levels.

Following a much stronger than expected US employment report on 8 July, equity markets globally extended their rally and kept rising for most of the month.

In the Australian share market, mining stocks performed well on the back of rising prices for iron ore and gold. At the same time, the energy sector underperformed due to a decline in the oil price.

Inflation data on 27 July showed the Australian inflation rate at a 17-year low, prompting fresh speculation about another rate cut from the Reserve Bank. Indeed, on August 2, the RBA cut the official cash rate to a record low of 1.5 per cent, bringing Australian official rates closer to the near-zero interest rates prevailing across many advanced economies.

“Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector,” the Reserve Bank said in a statement.

“Financial institutions are in a position to lend for worthwhile purposes. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this,’ the central bank said.

Australian bond yields fell, with the benchmark 10-year government bond yield hitting a record low of 1.86%. Around the world, government bond yields generally fell as investors pushed back expectations for a Federal Reserve rate hike. German 10-year Bund yields fell to a record low of minus 0.18%.

The Australian dollar rose over the course of the month from 74.51 US cents to 75.96 US cents, helped by a recovery in iron ore prices.