Dollar down US1c as Greek poll looms

by: By Jason Cadden

From: AAP

May 16, 2012

THE Australian dollar is extending its fall below below parity with the US dollar as renewed worries about debt-stricken Greece weighs on the currency.

Greece is expected to hold new elections, possibly on June 17, after political leaders failed to form a coalition government after a poll 10 days ago didn't deliver a clear winner.

The Australian dollar fell below 99 US cents in afternoon trade today for the first time since December 20 and at 5pm (AEST) was trading at 98.93 US cents.

Yesterday, it finished the local session at 100.02 cents.

Easy Forex currency trader Tony Darvall said the Australian dollar would grind lower until there was some certainty about Greece.

"Many traders are taking money off the table waiting to see what Greece leaving the euro zone means," he said.

"As soon as they've worked out the impact then the uncertainty is gone.

"Even if we know it's bad we can at least put a price tag on it, when we don't know how bad it is then the default position is to sell."

Mr Darvall said the Australian dollar should not go much lower than 98.60 US cents in the next day or so because that's when currency traders would start to buy the Australian dollar again.

"We haven't really had this sort of selling in the Aussie for a long time - not in the last five years," he said.

"Eventually, given that there is no structural US problem, stocks markets (and the Australian dollar) will have a big day."

Mr Darvall said he expected the Australian dollar be between 97 US cents and 98 US cents by the end of May.

At 5pm, the Australian dollar was at 79.50 Japanese yen, down from yesterday's close of 79.93 yen, and at 77.93 euro cents, up from 77.80 euro cents.

Meanwhile Australian bond future prices inched higher.

At 4.30pm today, the 10-year bond futures contract was trading at 96.820 (implying a yield of 3.180 per cent), up from 96.785 (3.215 per cent) at yesterday's close.

The June three-year bond futures contract was at 97.430 (2.570 per cent), up from 97.390 (2.610 per cent) previously.

Yesterday, the 10-year bond futures prices hit a record high at 96.850, and the three-year bond futures prices hit an all-time high at 97.470.

Deutsche Bank bond trader Andrew Bryan said euro zone prospects continued to weigh on the market.

"Domestic data is not of major interest to markets at the moment, and it is expected to remain like this until we get this Greek election out of the way. And that's another four weeks away."

The Reserve Bank of Australia's trade weighted index fell to 74.3 today, from 74.5 earlier.

Hockey at odds with Abbott on disability scheme

May 16, 2012

Shadow Treasurer Joe Hockey addresses the National Press Club of Australia in Canberra on Wednesday 16 May 2012. Photo: Alex Ellinghausen

Shadow treasurer Joe Hockey has accused the government of a ''cruel hoax'', arguing the Labor Party has announced a National Disability Insurance Scheme without the funding to back it up.

His stance, outlined in a budget reply at the National Press Club today, puts Mr Hockey at odds with Opposition Leader Tony Abbott's call for bipartisan support for the NDIS.

Mr Hockey insisted that he supported the NDIS but raised doubts over his committment to delivering the scheme when he said he would not raise ''false hope'' by committing to promises a Coalition government could not fund.

''You've got to live within your means and the government is engaged in a cruel hoax in saying that it's getting on with the job of the NDIS and then under-funding it,'' Mr Hockey said.

Mr Hockey said that the government had put the ''cart before the horse'' on the issue by committing $1 billion in funding before securing how much money the states could contribute.

''A number of state treasurers have said to me they haven't got the money the government is claiming they may have for the NDIS,'' Mr Hockey said.

This week, Mr Abbott signalled his committment to the NDIS, calling for a multi-party parliamentary committee to oversee implementation of the NDIS, which Ms Gillard rejected.

"It is important that we do set up this committee ... to make sure that all the details have been meticulously worked through and got right," Mr Abbott said.

Mr Hockey said the government had not engaged ''properly'' with the states on the scheme because they were afraid of the states reactions to the size of the cost.

The shadow treasurer said that one of his first acts as Treasurer would be to meet with state and territory treasurers to determine how much the states needed to pay.

Federal Labor has committed the $1 billion over four years to launch the scheme, which would see people with disabilities work with co-ordinators to develop individual support plans.

This week, Prime Minister Julia Gillard said the federal government would fund the ''lion's share'' of the NDIS but that states who participated in the launch next year would be expected to contribute.

Ms Gillard has not ruled out introducing a levy to help fund the scheme, ahead of upcoming negotiations with the states on how to design and implement the NDIS.

Australian Government pledges $300m to Afghan security

May 16, 2012

The Federal Government will contribute $100 million a year for three years to support the Afghan National Security Forces beyond the transition process.

The money will be rolled out from 2015, once Afghanistan has taken over responsibility for its own security.

Australia will also help train and mentor the Afghan National Army and police and is considering an ongoing special forces presence in the country.

Prime Minister Julia Gillard and Defence Minister Stephen Smith will fly to the US this weekend, where they will present their financial pledge to a NATO meeting.

The fresh financial support follows a previous commitment of $200 million over five years to a trust fund for the Afghan National Army.

ABC political correspondent Sabra Lane says the new contribution is significant.

It's estimated that Afghanistan will need something like a force of 230,000 troops beyond 2014 to ensure that areas don't fall back into the hands of the Taliban.

The cost of maintaining a force of that size is put at just over $US4 billion. That's way beyond Afghanistan's ability. So in that context Australia's contribution is significant.

Australia's money will go into a special trust fund with transparency measures in place to make sure it is actually spent on that and nothing else.

Australia will also make a long-term commitment to Afghanistan to help the country with education and health services beyond 2014.

The Government says Australia will maintain a "substantial development assistance program" beyond 2014, in areas including security, trade and investment.

That program will be set out in an agreement to be signed by Ms Gillard and Afghan president Hamid Karzai.

Earlier this week Ms Gillard said most of Australia's 1,500 troops could be home by next year and may start leaving as early as this year.

"Transition is a process that will take between 12 and 18 months - that's what president Karzai has said overnight, that's what I said in my recent speech to Australia about the strategy in Afghanistan," she said.

"And it's at the end of the transition process that we would see the bulk of our forces come home."