AMP Capital’s chief economist Shane Oliver says listed Australian companies are expected to produce solid overall profit growth in the upcoming reporting season, which will continue to underpin the stock market.

But the results will be mixed, with banks, telcos and retailers struggling, and Australia’s profit growth will continue to lag the stellar profit growth of US companies.

Oliver says he is looking for 9 per cent overall profit growth from Australia’s listed companies during reporting season, which relates to the first half of 2018 but more broadly the 2017/2018 financial year.

“That’s pretty good,” he says. “Bear in mind, though, that’s a little bit skewed to resources.

Oliver says resources profit growth for the period should be around 25%. “That’s a bit slower than a year ago when it was running around 130%. But you’ve still got pretty good commodity prices, particularly for the bulks like iron ore, coal, also energy, and of course you’ve still got good volume growth. So, resources are still going pretty well, but quite a bit slower than a year ago.”

Excluding resources, Oliver says the broader market should report profit growth of around 5%. “Overall it’s reasonably ok. But some sectors, particularly banks and some of the retailers still struggling with intense price competition, might struggle a little bit.

Telcos are another area where we expect some disappointment.

“On the flip side we’re probably going to see some pretty good results out of insurers, healthcare stocks, building materials, gaming companies and utilities.”

Oliver says that overall profit growth of 9% “keeps the Australian share market well supported, particularly as we go into the current financial year”.

“But obviously it’s nowhere near as strong as profit growth in the US, so the relative underperformance of the Australian share market we’ve seen will probably continue for a little while yet.”

US companies have reported strong profit growth for the June quarter. With more than 80% of companies having handed down their results, overall profits are up around 25% to 26% on the period a year earlier.

Some 85% of  US corporate earnings have surprised on the upside; and around 72% of revenues surprised on the upside. A large part of profit growth has been driven by tax cuts, but excluding that, profits still rose a strong 15 per cent.