Eureka's Week: Negative gearing, US jobs, misleading GDP, cheapness, Brexit

Negative gearing | Eureka's Week | US jobs | Misleading GDP | Cheapness | Brexit | Readings & viewings | Last week | Next week

Last night

Dow Jones, down 0.18%
Nasdaq, down 0.58%
S&P 500, down 0.29%
Aust. dollar, US73.6c

Paul Clitheroe

Last week I went over what I believe are the keys to financial success. Hardly surprisingly there is not much complexity here. Despite the best attempts of our financial system to make things as complex as possible, not a lot has changed about money, investment and risk for a few thousand years.

Your feedback is always greatly appreciated, much better if I write about what interests you and I did get quite a bit of comment during the week about one of my points, that "we use our quite silly tax system, legally, but to our advantage”.

Quite a few of you wanted to know:

FIrst, why is the tax system silly, and

Second, how do you take legal advantage of it?

The first question is easy to answer, but quickly moves into dangerous waters. Our tax system is silly because it has evolved via a bandaid approach and the tax act now fills pretty much a shipping container. A lot of it is bandaids on bandaids.

In turn a lot of this is driven by a democracy. Winning elections is much easier if you shower gifts, such as tax breaks, on the voting population.

Now to the dangerous bit, for me anyway. I really don't want you to feel like throwing rocks at me, but in my opinion the silly bits include sacred cows such as negative gearing residential property. I have used negative gearing for decades, so plead guilty to supporting a bad tax break for personal gain. An absolute truth in behavioural economics is "you can always count on self interest", hence my early guilty plea. But let's take a more community-wide view.

In pretty much all other first world countries you get a tax break on the mortgage on your family home. But in a moment of genius our forebears decided to give us no tax break on our home, but on investment properties. Incidentally, despite the vesting interest bleating of the property sector, other first world countries such as Europe and America have plenty of properties for rent. Now I think about it, that is a very clear rule of money. Listen politely, but with a cynical mind to people trying to flog you something. Or who make money out of what is being flogged.

Clearly tax policy shapes behaviour, so quite sensibly in a country with a growing population and limited tracts of land for long term habitation, Blind Freddie could see that well located property will do ok over time. The best plan of course is to rent a home and gear up a few properties. This gets a bit too hard so we tend to buy a home and then an investment property.

As my son said to me armed with his undergraduate economics, "Hey Dad, if I live at home and can I scrape a deposit together and get a loan, is it right that I take all the costs of owning a property such as maintenance, insurance, mortgage interest, deduct the rent I get and I get a tax deduction on the loss?”

Answer. Yes son.

"But" says my son "the money is costing me about 5 per cent, the rent after all my costs are deducted gives me about 3 per cent, the loss of about 2 per cent is tax deductible, at my tax rate, so for me the cost of owning this property is barely 1.2 per cent of its value. So it needs to increase in value by 1.2 per cent, assuming rates stay at around five per cent for me to break even.”

Yes son.

"But a well located property will grow much faster than 1.2 per cent a year on average, inflation is about 2.5 per cent, so this is a no brainer. Also my mortgage is going to be rapidly shredded by inflation over time. So is it right that our tax system subsidies my purchase and assists me to own an asset while inflation depreciates the real value of my loan. And I get a 50 per cent CGT discount on tax if I sell?”

I'll let you guess what he did next. And today of course, his rent is higher and interest costs are lower.

This is where the rocks start flying in my direction. I get the argument. If we become financially independent we will not be a burden on tax payers in the future. I really do get that. But the real problem with negative gearing is that the more you earn the more powerful it is. Above $180,000 a year, with the two per cent "budget repair levy" and Medicare levy tax is close enough to 50 per cent. That means losses on investment properties  see a tax return of 50 cents in the dollar. As with super, the greatest leverage flows to the highest income earners. Again I plead guilty.

If you want to see a really solid dissertation on our silly tax system just go back to the Henry Report done by Ken Henry some years ago when he was head of Treasury (to read it, click here). Sadly his remit did not include a higher GST, but his recommendations remain a wonder blueprint to a fairer system.

Look, it is bleedingly obvious that as a nation we spend more on the stuff we need and want than we collect in tax. This is seen in the budget deficit. Yes, I want lower tax, tax breaks, but I also want really good health care, roads, schools, infrastructure, a strong police force and so on.

So what do you want to do? We can't spend more than we generate in taxes over any extended period of time. Do we pay more tax, and if so how do we levy it fairly? Or do we accept a lower level and quality of services?

Challenging call, in particular if you are a pollie trying to get re elected. No bad news thank you.

Anyway, in particular if you are a high earning, younger age Aussie you'd need to be nuts not to use the silly negative gearing rule in a sensible fashion. At 60 I am moving into capital preservation, so my gearing is winding down. This is not just my age, I hope to be here for a fair while, but my tax rate is declining making gearing less powerful.

That takes me to next week's topic. Superannuation. Now there we have a truly world class system, but again with some really silly rules.

- Paul Clitheroe

Eureka's Week

US Jobs

The Australian dollar has jumped to US73.6c this morning after an absolute shocker of an employment report in the United States. Nonfarm jobs went up just 38,000 against market expectations of 158,000, and it was the smallest monthly jobs gain since September 2010. A June rate hike is now off the table and the market is looking to September for the next one.

Whether it's an aberration or the start of something, nobody knows, and the US doesn't seem to be slipping into recession. But the previous two months' numbers were revised down by 59,000. The unemployment rate fell from 5 to 4.7 per cent, the lowest since 2007, but that was a negative too because it was due to a big drop in the size of labour force. Underemployment was steady at 9.7 per cent.

As a result of all this, the US dollar index dropped from 95.5 to 94 in a heartbeat, and the Aussie jumped from US72.4c to 73.6. Wall Street stocks fell as well, but not much – the Dow is down about 15 points as I write and the S&P 500, five points – and there was also a rally in bond prices. The yield on 2-year Treasury paper fell 11 basis points to 0.78 per cent.

On that subject, by the way, the amount of sovereign debt in the world that is trading at a negative yield has just gone above $US10 trillion, an amazing event. In other words, asset managers are diving through the negative yield wormhole in increasing numbers, even though they have no idea what lies on the other side. They are chasing capital gains. For example German bunds, which yield minus 0.1 per cent, have actually returned 4.2 per cent since the start of 2016 because prices have gone up. Bonds, it seems, are no longer fixed income securities, but quintessential growth assets. Not only do they pay no dividend, but you have to pay to hold them. The world is upside down.

Anyway, back to the US economy – none of the analysts I've read this morning attribute the small jobs growth to Donald Trump, but I wonder… Suddenly a big risk has entered US, and global, politics, and while Republican voters clearly don't see it that way, maybe employers are starting to hunker down a bit and reduce costs in anticipation of volatile times.

For whatever reason, the US labour market has lost momentum. If that persists, it won't be long before the housing market joins it in the doldrums.

Misleading GDP

The Australian economy is now a mass of contradictions and puzzles. The picture painted by Wednesday's national accounts is so complicated for investors, that it needs interpretation and is almost useless.

The headline number was real GDP growth of 3.1 per cent - above trend and looking fine. Two other good news items, not in the national accounts, are that unemployment is falling and consumer confidence is strong. Here are some charts to illustrate those things:

Source: CBA Economics

Unemployment and employment

Source: ANZ

But hang on – wages growth is the lowest since the 1991 recession, inflation is very low, domestic demand is weak, nominal GDP is falling and is below real GDP (a very rare event) and business investment is going backwards – and not just in mining.

More charts:

And finally, house prices in Melbourne and Sydney are booming again – up more than four per cent in May – seasonally adjusted by ANZ's economists:

Sorry about all the charts, but as you know, I think they tell the story about what's going on better than words. But they don't really explain why it's happening.

Strong economy and falling unemployment occurring at the same time as falling inflation, business investment and wages growth is bizarre. The economic textbooks will tell you it simply shouldn't be happening.

I don't think the explanation is all that satisfactory, but basically it comes down to two things: the big negative terms of trade shock, and the fact that underemployment (as opposed to unemployment) is at an historic high.

The strong GDP number for the March quarter was produced by a big lift in net exports (exports minus imports), a solid rise in consumer spending, supported by decent consumer confidence, another surge in apartment building and continued solid growth in government spending (mainly the states).

But the income from those exports is quite weak because of the big falls in commodity prices, and there's still a lot of slack in the labour market that is not reflected in the unemployment rate.

Basically, the two key ways of measuring the economy – GDP and unemployment – are no longer telling the full story. In fact, they are quite misleading.

GDP measures the volume of national output but ignores the dollars. It would be like Woolworths reporting how many grocery items it sold last year, or BHP reporting on the volume of iron ore sold, rather than the dollar revenue. The volume of stuff sold is irrelevant, and not even reported.

Given what's happening in commodity markets, I reckon the amount of iron ore and coal we are selling to China is also irrelevant: what matters is how much we're making from it.

I think we are also at the point where unemployment is also misleading.

The unemployment rate in April was 5.7 per cent and employment increased by 10,800. Good news.

Yes, but underemployment is flat at about nine per cent. That's defined as those who have a job but want/need to work more and earn more money.

That issue is also evident if hours worked is divided into part time and full time:

More and more people are being moved from full time to part time by having their hours or shifts cut back, or overtime cancelled, but the ABS still counts them as employed.

The bottom line is that when thinking about the Australian economy, and its implications for your investments, you can no longer just look at the usual headline numbers of GDP and unemployment. They don't work anymore and they don't explain what's happening.

Nominal GDP is essentially the tax base, so when it's weak so is the budget. That means taxes will rise, either by whacking super (as the Government has done), bracket creep, emissions trading or a tax surcharge on high income earners (which the ALP is keeping), and spending will be cut, putting downward pressure on demand.

If wages growth is weak, that means spending has to be funded by “dis-saving” (borrowing), and that's what is happening. The expansion of debt is also fuelled by the boom in property investment, in turn supported by negative gearing.

It means, I think, that banks (and governments) need to be treated carefully. They are in straitened times, when income isn't what it used to be and the future holds unusual risks and pitfalls – namely further declines in the terms of trade and, perhaps, a housing bust.

I'm not predicting either, but the risks are, as they say, elevated. Just don't use GDP as your investment compass.

Cheapness

A great quote from Jim Grant:

“In general, if a parking spot on a Manhattan street appears to be unoccupied, it isn't a legitimate parking spot. So, by analogy, on Wall Street. If a company appears to be cheap in the sixth year of a bull market, it probably isn't a legitimate company, and it probably isn't cheap.”

Note the word “probably”.

Also, while it's pretty clearly the sixth year of a bull market on the New York Stock Exchange – even though it's been faltering these past 12 months – it's not at clear that the Australian market is also in the sixth year of bull market.

Here's the S&P 500 over 10 years:

And here's the ASX 200:

Rather less of a bull market, wouldn't you say? But probably a weakish, long term bull market nonetheless – it's just that the corrections within have been bigger and longer.

Also, the US market is looking expensive – an outlier in fact – so stocks are much more likely to be expensive than cheap, as this chart from Shane Oliver suggests:

Anyway, I reckon that if you see a “parking spot” in the Australian market, which is to say a stock that looks cheap, it could well be a legitimate one.

Brexit

Britain's referendum on June 23 on whether to stay in or leave the European Union is shaping as a turning for global equity markets, not so much for that particular vote itself, but for what it signifies.

The biggest macro risk facing our investment portfolios now is not recession, although the risk of that is definitely not zero, or a sudden move by the Fed or the RBA, but politics.

Specifically, Donald Trump, with slightly less scary populists in the UK and Europe, including the right-wing Alternative for Germany (AfD).

If Brexit fails, which is the most likely outcome at this stage, then markets will breathe a sigh of relief and conclude that Trump won't win in November either.

But if Brexit gets up – that is, the emotional – then markets will go “risk-off” big-time as they brace for a Trump victory and perhaps AfD in Germany.

As Anatole Kaletsky pointed out in GaveKal this week, the mathematics are a negative.

The latest betting assigns a probably of 25-30 per cent for each of these events (Brexit, President Trump and victory for AfD in 2017). “For three independent events, the chance that at least one will occur is: one minus the product of the probability of each not occurring. If each has a 25% probability, then the chance that at least one will occur is 1-(1-0.25)^3 = 57.8%.”

That's one thing, but markets probably won't see it that way because the three events won't be seen as independent – they are all part of the same anti-trade, anti-immigration populist movement that has been sweeping the world for a year or more.

One of them getting up – Brexit is the first – would tell markets that the others are more likely to because the populaist movement has real substance. It would also give the Trump and AfD supporters plenty of confidence.

So how should we prepare for all this? Well, I don't think assuming a 57.8 per cent probability of a big, panicky correction sometime in the next six months is very helpful, although if you're an anxious investor who absolutely cannot afford a short term loss, then you might want to consider it protecting your portfolio fully against that (by going to cash).

I'm rather more worried about a Trump victory than Brexit, so there's probably some time. I'm far from an expert on US politics, or UK politics for that matter, but “President Trump” seems more likely than Britain exiting Europe.

However the risk of one or both things happening needs to be taken seriously. If it did happen, it would be very negative indeed for equity markets.

Readings & viewings

This is a few years old, but it's wonderful, and still relevant. Ray Dalio, the founder of hedge fund Bridgewater Associates, created a 30 minutes video entitled “How The Economic Machine Works”, and it really does explain, simply, how it works.

There was a bit of a kerfuffle late in the week over an OECD comment about Australia, in which it said, according to some reports, that there will be a “dramatic” crash in the Australian property market. If you're wondering what it actually says, and the context, here it is (it's 3 pages long):

A laptop computer today is 9^5 cheaper than a 1994 model and 1000 times better.

The share of the world's population living in extreme poverty has fallen from 94% in 1820 to less than 10% now, according to the American Enterprise Institute, a libertarian think tank.

This is an amazing video of the Atlas Robot built by Boston Dynamics. It's so human it's almost scary, and definitely fascinating.

What Are You? Are you your body? And, if so, how much of your body can you remove before you stop being you? And does the question even make sense?

Air Koryo, the North Korean airline, is consistently rated the world's worst airline – one star. Here's what it's like to fly Air Koryo.

Here's a simple explanation of how blockchain works.

What do we think of hybrid securities?

Safe sales are skyrocketing in Japan.

Clive Crook: Clinton should stop pretending to be normal.

Federal prosecutors in New York have racked up 91 insider trading convictions and collected almost $2 billion in fines. Who knew?

Nice story on the new owners of Eureka Report – AWI, soon to be renamed InvestSmart. 

George Friedman interview: what would a Trump Presidency mean for Mexico? Not very much at all.

DNA: the power of the beautiful experiment.

The world' biggest cruise ship has just had its maiden voyage: $1.5b, 16 decks, 1187 ft long, 6360 passengers.

San Francisco is a wealthy tech haven today — but not long ago it was an apocalyptic madhouse.

A “risk rill” for your portfolio.

This was published on the IMF website this week: “Neoliberalism: Oversold?”

It's the age of musical plenty – all the songs are ours now, all the time.

Which animals can swim up your toilet?

Why male fruit flies have giant sperm.

The strange Treasury modelling used to sell the company tax cuts.

Prince's death from fentanyl is only the tip of the global overdose iceberg (it's 100 times stronger than morphine).

Last week

Shane Oliver, AMP

Investment markets and key developments over the past week

Shares were mixed over the last week with US and Chinese shares up, but renewed Brexit fears weighing on Eurozone shares, disappointment at the lack of fiscal easing just yet weighing on Japanese shares and Australian shares being weighed down by a fall in the iron ore price and worries that stronger than expected GDP growth means reduced prospects for RBA rate cuts. Metal prices fell slightly but oil was little changed despite OPEC failing to agree to a production target, the $A rose slightly and bond yields in major countries fell. 

Looks like I was too soon to speak of diminishing Brexit risk a week ago with the latest round of polls seeing support for the “Remain” and “Leave” options converging again. Here are some key points on the June 23 Brexit vote:

First, even if there is majority support to Leave it could be two years or so before the terms of the exit are agreed.

Second, a victory for Leave would be seen as a negative for the UK given the threat it would pose to its access to EU markets, its financial sector and labour mobility. The size of this impact would depend on what sort of exit is negotiated with the EU but has been estimated at somewhere around -2% of UK GDP. This would adversely affect UK assets including the pound. Britain could in time agree a trade deal with the EU (like Norway has) but this would involve a loss of sovereignty as Britain would have to agree to EU rules with no say in setting them.

Third, the real issue (given the diminishing significance of the UK economy) would be perceptions of the impact on the Eurozone. A Brexit would not be of the same order as a Grexit because Britain is not in the Eurozone. But it could lead to renewed concerns about the durability of the Euro to the extent that it may be seen as encouraging moves within Eurozone countries to exit the EU and Eurozone (eg, a Frexit) which in turn could reignite concerns about the credit worthiness of debt issued by peripheral countries, lead to a flight to safety out of the Euro into the $US which could in turn put renewed pressure on emerging market currencies, the Renminbi and commodity prices. All of which could trigger a bout of nervousness in global financial markets. Ultimately, the latter seems unlikely though as it would more likely trigger more pressure for integration in the Eurozone. Markets won't know that initially though.

Fourth, a Leave victory may be seen as reinforcing the anti-globalisation forces already evident globally.

Fifth, while this sounds negative a Brexit has been subject to constant debate lately and is seen as the biggest “tail risk” by fund managers according to a recent survey, so it should be at least partly allowed for.

Sixth, Brexit uncertainty argues strongly in favour of the Fed delaying any rate hike until July if it wants to avoid being seen as reckless. Key Fed officials recognise this.

Finally, while the polls show the vote is close, it is notable that the Remain vote has had the edge over time and my assessment is that a majority of British voters will chose to stick with the status quo, much like the Scots did last year. So I attach a 70% probability in favour of Remain.

Has China really overinvested? This seems to be taken as a given and then used to justify a bearish for ever view on commodity demand, comparisons to Japan, etc. But I am still a bit sceptical. Two things have particularly added to my scepticism lately. First, if the Chinese housing market really saw a massive over supply of housing with ghost cities etc then why do Chinese property prices take off every time the regulators take the brakes off? Soufun's 100 city property price index rose 1.7% in May and is now up 10.3% yoy. Second, the following stats on the number of airports in each country caught my eye: the US 13,513; Canada 1467; Russia 1218; Germany 539; Australia 480 (must include little ones); China 507. Not much sign of an overinvestment in China here! And I suspect the same applies in relation to much of China's infrastructure.

Australia's minimum wage to rise 2.4% to $17.70/hour, but it's unlikely to have much macro impact as it only affects 15% or less of the workforce so won't affect overall wages growth much. Last year's rise was 2.5% and yet overall wages growth still slowed to 2.1% year on year. While Australia's minimum wage in US dollar terms was way above OECD country norms when the $A was above parity, the 30% plus plunge in the $A means it's not as much of an issue now from a global competitiveness point of view. Having a relatively high minimum wage compared to say the US is one reason why unemployment is higher in Australia versus the US, but then it does have some benefits from a social equity point of view.

Major global economic events and implications

US data was mostly favourable with a increased consumer spending in April, continued gains in home prices, a surprise rise in the May manufacturing conditions ISM index, solid jobs data and stronger than expected auto sales. However, construction spending and consumer confidence were softer than expected. Meanwhile, the Fed's preferred inflation measure, the core private final consumption deflator was unchanged at 1.6% year on year in April compared to its 2% target and the Fed's Beige book observed “modest” economic and wages growth and “slight” price rises.

As expected the ECB remained in implementation and assessment mode at its June meeting, but the ECB's continuing sub target inflation forecasts (1.6% for 2018) and President Draghi's dovish comments indicate it retains an easing bias. Eurozone economic confidence improved for the second month in a row remains at levels consistent with continued okay economic growth, unemployment remained high at 10.2% and bank lending continued to increase modestly. Meanwhile inflation ticked up slightly but core inflation at 0.8% yoy remains well below target.

As widely expected, Japanese PM Abe has delayed the scheduled second increase in its GST rate to October 2019, with “bold” fiscal stimulus likely to be announced in the months ahead. Meanwhile, labour market data for April was solid and industrial production rose but it's still trending down on a year ago and household spending remains weak.

Chinese May business conditions PMIs were flat or down slightly and remain up on recent lows telling us that GDP growth is continuing to run along between 6.5-7%.

India remains a star performer globally with GDP up 7.9% over the year to the March quarter.

Australian economic events and implications

Australian data released over the last week was mostly strong with GDP much stronger than expected and up 3.1% year on year, building approvals rebounding back towards record levels, house price momentum picking up again led by Sydney, okay retail sales growth and the trade deficit continuing to contract. However, there were some soft numbers though with a fall in new home sales and mixed PMIs for May.

The bottom line is that thanks to a combination of booming resource exports as various projects complete (the third phase of the mining boom) along with a rebalancing of the economy towards consumer spending, housing

However, there are some dampeners: demand growth in the economy remains very weak with private final demand virtually flat; surging resource export volumes won't create many jobs; nominal growth in the economy (at 2.1% yoy)  is very weak reflecting the commodity price slump and very low inflation; this in turn is weighing on profits; and meanwhile the seeming return to boom conditions in the Sydney and Melbourne property market and another spike in apartment approvals poses an increasing risk of a property bust down the track.

Overall, our conclusion is that given the various cross currents the RBA won't be rushing into another rate cut in the months ahead but will cut again later this year. Meanwhile, if the renewed strength in home prices isn't temporary expect a renewed round of APRA measures to slow mortgage lending.

Next week

Craig James, CommSec

Reserve Bank back in focus

As regularly seems to happen, the past week was packed with economic data and events and the coming week is far more pedestrian – from feat to famine. The highlight is the Reserve Bank Board meeting on Tuesday.

But the week kicks off on Monday with the release of the monthly inflation gauge and the job advertisement series.

The inflation gauge is produced by the Melbourne Institute and is the best monthly estimate of inflation in Australia.

The job ads data is produced by ANZ. Five years ago it was a key forward-looking gauge on the job market but job openings are now advertised on a range of corporate and social media sites.

On Tuesday the Reserve Bank Board meets to decide interest rates. Will the Reserve Bank cut rates again? Simply, there is no rush. The economy is doing well; it is just that inflation is too low. The Reserve Bank Board can afford to wait until it sees the June quarter inflation data in late July before deciding the next rate move.

Also on Tuesday the weekly consumer confidence data from ANZ and Roy Morgan is released. Confidence is holding up remarkably well despite the fact that we are in an election period.

On Wednesday, the April housing finance data is released – the data on new home loans. Based on figures from the Bankers Association we expect that the number of loans for owner-occupiers (people who are buying homes to live in them) rose by 3.5 per cent. In March the number of new owner-occupier housing loans (commitments) fell by 0.9 per cent after rising by 0.9 per cent in February.

There will be plenty of interest in refinancing statistics data though after the 8 per cent lift in March to record

highs. And on Friday the broader lending finance data is released. This includes not just home loans but also business, personal and lease loans. Total new loans (personal, business, housing & lease) rose by 0.7 per cent in March after a 3 per cent rise in February.

Chinese data dominates in lacklustre week

Similar to the situation in Australia, the economic calendar is more sparsely populated in the US in the coming week. Still, there are some ‘top shelf' indicators to watch in China. The week kicks on Monday in the US with Federal Reserve chair, Janet Yellen, to deliver a speech on the economic outlook and monetary policy. This may settle the argument on the timing of the next rate hike. On Tuesday in the US updated data on labour costs and productivity are released – figures derived from the latest economic growth (gross domestic product) estimates. Labour costs may have lifted at a 4.1 per cent annual rate with productivity down 0.6 per cent. This is hardly the optimal combination and one that will keep Federal Reserve policymakers poised to lift interest rates.

Also released on Tuesday is data on consumer credit, a measure of lending in the economy. The usual weekly data on chain store sales is also released on Tuesday.

On Wednesday the JOLTS series is released – the Job Openings and Labour Turnover Series. This series is similar to the job vacancies or job advertisement series in Australia – a forward-looking gauge for the job market. Over the 12 months ending in March, hires totalled 62.4 million and separations totalled 59.6 million, yielding a net employment gain of 2.8 million.

Also on Wednesday, in China the May international trade data are released – exports and imports – one of the timeliest and cross-checkable economic indicators. Over the year to April, exports were down by 1.8 per cent while imports were down by 10.9 per cent. All major countries release trade figures so the Chinese data can be cross-checked for accuracy.

On Thursday, the wholesale sales and inventories data are released in the US. Sales rose 0.7 per cent in March with inventories up 0.1 per cent – more signs of strength in the economy. The usual weekly data on new claims for unemployment insurance (jobless claims) is also released. Also on Thursday in China the monthly inflation figures are released for May – producer and consumer prices.

Producer prices are down 3.4 per cent over the year while consumer prices are up 2.3 per cent, although boosted by higher food prices.

And on Friday in the US, the preliminary June consumer sentiment survey results are released together with the May estimates of the Federal Budget. Consumer sentiment is at the highest levels in 11 months.

Sharemarket, interest rates, currencies & commodities

Do you think the Aussie dollar has been volatile over the past financial year? The Aussie hit its lows against the US dollar on January 15 at US68.24 cents and hit highs of US78.35 cents on April 21.

While the lows and highs occurred in a relatively short time-frame, over 2015/16 as a whole the Aussie dollar moved in a US10.09 cent range. If that range still holdsover the next month it will be the least volatile year for the currency in a decade. Good news for importers and  exporters; bad news for traders.