By Swati Pandey and Yuzuha Oka

By Swati Pandey and Yuzuha Oka

SYDNEY (Reuters) - Australian shares are set for modest gains this year and may do slightly better in 2017 as record low interest rates and a rebound in commodity prices temper some of the concerns over Brexit, and the Chinese and global economies, a Reuters poll found.

The benchmark S&P/ASX 200 <.AXJO> index has barely changed this year, and the 6,000-point barrier looks out of reach even next year as the end of a mining boom in Australia and external headwinds keep buyers at bay.

The index is seen closing out 2016 at 5,500 points, up 3 percent from Monday's closing level at 5,337.11, and 3.9 percent higher for the year, the median forecast of 11 strategists polled over the past week showed.


That is little comfort for investors after two years of dismal performance, although 2017 will show some improvement with the index set to hit 5,725 by mid-2017 and 5,800 by year-end, a gain of 8.6 percent from Monday's close, the poll showed.

For the whole of 2017, the benchmark is seen up 5.5 percent based on the predicted finish of 5,500 points for this year.

The relatively slower pace of increase for the index is underscored by its inability to take out its most recent peak of 5,996.9 reached in March 2015, the highest level since February 2008.

Overall, Australia's stock market is seen supported by fairly solid economic growth, even as Britain's shock vote to leave the European Union last month and a slowing Chinese economy have tempered investors' mood.

"Although volatility in Europe will be a dominant factor for coming months, the Australian domestic economy is in good shape. Consumer confidence and spending are looking good," said Savanth Sebastian, Sydney-based equities economist at CommSec.

"The labour market and housing sector show steady growth. We are expecting some rate cuts by RBA, and it will support the flow of the capital."

Alongside that, commodity prices have shown signs of recovery after slumping for two straight years to record or multi-year lows. Iron ore <.IO62-CNI=SI> has jumped about 29 percent this year so far, recovering from a near 40 percent drop in 2015. Oil <LCoc1> has risen by a quarter this year.

Together, the two commodities account for half of Australia's exports by dollar value.

(Polling by Swati Pandey, Yuzuha Oka and Reuters polls Bengaluru; Editing by Shri Navaratnam)