The Australian dollar has recovered sharply from its lows last year reflecting a combination of $US weakness, stronger commodity prices and the likelihood Australia will be the first major country to start raising interest rates.

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A Global blowout in public debt has been a key outcome from the global financial crisis (GFC). Aging populations are also playing a role.

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The Australian economy is set to grow by around 4% through this year, reflecting the lagged impact of monetary and fiscal stimulus, high levels of business and consumer confidence, the rebound in wealth, and higher export prices. This is likely to push unemploymnet back below 5% over the year ahead.

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In terms of net positive surprises, the reporting season that just passed in Australia was the strongest since August 2007. This was a global phenomenon.

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It is a year since markets bottomed in March 2009 following the unprecedented and co-ordinated government support packages sanctioned by the G20. Since 12 March 2009, the US S&*P 5000 has risen by about 72% and financial shares by over 140%. In Australia, the market has lifted by about 55%. Over this same period, the $A has also risen by 30% and therefore our gains are even more impressve in $US terms.

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Government debt continues to be the major issue that threatens a recovery in equity markets. The escalation of trade tensions between the US and China is a most unwelcome development and one that investors must watch closely.

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