Wayne Swan the punter’s friend. Malcolm Turnbull is a sceptic but Jonathan Xiong is not. While the Opposition Leader last night was preaching doom and gloom for a debt laden Australian future, the vice president and senior portfolio manager at Mellon Capital Management Corp. in San Francisco was placing bets that the Wayne Swan budget will work.

Mellon Capital, one of the world’s biggest and most adventurous financial gamblers, thinks the Australian dollar will rally the fastest among the world’s most-traded currencies as economies revive. “This is a true economic recovery play,” Mr Xiong, who oversees $18 billion for the firm which describes itself as the originators of value-based tactical asset allocation, told Bloomberg. “The Australian dollar is our favorite position relative to the Group of 10 currencies.” Australia’s currency is now the fund manager’s biggest long position against the greenback, Xiong said.

Interest rates to stay steady? The higher official interest rate in Australia than in most developed economies is no doubt an attraction to Mellon in punting on Australia’s future and the market expects that advantage to continue. Our Crikey Interest Rate Indicator has no change at the June Reserve Bank board meeting as the most likely outcome.

Too clever by half. The very dull and boring reply to the budget by Malcolm Turnbull will not be troubling the Labor Party too much. While the Opposition is not prepared to say what it would actually do to reduce the debt it claims to be so bad it will make very few, if any, converts. The rhetoric about Labor spendthrifts will just pass over the heads of most voters, who so far seem to have grasped the Labor message that these are unprecedented economic times that have little to do with anything this government or the previous one has done or not done. The Kevin Rudd taunts to say what your lot would do will end up further damaging the Opposition Leader’s standing.

There will be no great regret either in the Labor camp if the legislation changing private health insurance is finally rejected by the Senate. In the overall scheme of things the amount of money is not going to make a huge difference to anything but rejection will help drive home the point that Team Turnbull is every bit a squib when it comes to hard, cost-cutting decisions, as the Government.

Double dissolution chances fading. If private health insurance is the only major budget element that the Coalition helps reject in the Senate then the chances of a double dissolution will diminish. Calling an early election is always a risk and a worsening of unemployment does not necessarily mean that a government suffers. Just recall the Hawke and Keating wins in the midst of recessionary times. In tough times people are wary of taking a risk about the unknown team. They wait for the good times to punish — just ask John Howard.

What’s good for General Motors . Hopefully this is not a time where General Motors leads and the rest of the United States follows, because it is looking increasingly likely that the once great car company will end up in bankruptcy proceedings. The GM Chief Executive Officer Fritz Henderson said overnight that “it is probable” that GM will end up using the bankruptcy process. The market had already reached that conclusion with the probability rated a 90 per cent chance on the Intrade prediction market.

And if you fancy a little speculation on the chances of either the United States or Israel dropping a bomb on Iran before year’s end —

Peter Fray

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