It was all back on for the ASX today, as investors ran with the reinvigoration of the Trump trade and new records on Wall St.

Fewer than one in five of the top 200 names finished the session in the red as the benchmark index jumped 72 points or 1.3 per cent to 5777, on the way recording its best session for 2017.

In economic news, January's trade balance came in well below expectations but still firmly in boom-time territory thanks to high coal and iron ore prices, as well as ramping LNG exports. The Aussie was largely unmoved, though, and finished the day slightly lower at 76.55 US cents as it weighs strong local data with a firming US dollar. The greenback is being supported by climbing odds of a US rate rise in a couple of weeks' time.

The ASX gains were made even more impressive as they were made despite the weight of some bluechips trading ex-dividend, including Woolworths, Lendlease, Woodside and Fortescue (if we may call the iron ore miner a bluechip).

As usual, a coordinated drive higher from the big banks and miners was responsible for the market's rise. The big four lenders were all higher by between 1 and 1.3 per cent, following the overnight lead from their US counterparts.

BHP added 3.3 per cent and Rio 3.5 per cent. Fortescue nudged higher which, as we mentioned, is a pretty good effort as it trades ex-div. But South32 and Alumina were the standouts and topped the day's performers, as both climbed by more than 9 per cent amid more talk of Chinese authorities moving to curb production of aluminium (of particular relevance) and steel.

As bonds sold off, so too did bond proxies such as Sydney Airport, which lost 1.5 per cent, and Transurban, which fell 0.9 per cent. Real estate stocks did OK, though. Telstra stuck out like a red thumb in the bluechips, as it dropped 1.5 per cent. The big telco traded ex-div yesterday.

AFR tech biz columnist John McDuling breaks down what investors are betting on when they back what looks likely to be the biggest US float since Alibaba:

The case for investing in Snap Inc really boils down to one thing: how much of a genius you think its 26-year-old founder Evan Spiegel is.

Let's be clear: There is no real financial justification for investing in the owner of ephemeral messaging service Snapchat right now.

The company somehow managed to lose more money ($US515 million) than it generated in revenue ($US404.5 million) last year. Revenue growth is slowing, its user base is even smaller than struggling social media rival Twitter's and its key product was effortlessly cloned by Instagram, a unit of Facebook.

Evidently, some big investors in the US are OK with all of this.

Snap Inc priced its IPO on Wednesday morning above the advertised range, giving it valuation of $US24 billion ($31 billion). We'll get a clearer sense for how robust demand is when the stock starts trading on the New York Stock Exchange this evening (Australian time).

Before you rush to say the Snap valuation is evidence of a bubble in tech a few points need to be made.

First, the big valuation probably shows that demand for hot new tech IPOs outstrips the supply of them. Some prominent investors in the US have been complaining for a while now that hot brand name "unicorn" startups (think Uber, Airbnb and so forth) have been staying private for too long.

Now their wish has been granted, with a company arguably not ready for the primetime of a stockmarket listing making that leap.

Nobody can say with any confidence whether Snap will end up being the next Facebook or the next Twitter. But in spite of the obvious concerns around its finances, the company does have a lot going for it.

It has a user base made up of hard-to-reach millennials, a unique and potentially very lucrative advertising model, and like most great tech firms including Facebook (but unlike Twitter, which has suffered a revolving door at the CEO level) a clear, dominant founder.

That founder, Spiegel, known to many in Australia as the fiancee of supermodel Miranda Kerr, is a different type of tech entrepreneur.

His specialty is product design – the look, feel and user experience of a web product. Unlike Mark Zuckerberg or Jack Dorsey, he reportedly knows very little code.

Read more here.

Is the art bubble bursting? Russian billionaire Dmitry Rybolovlev paid about $US85 million for a landscape by Paul Gauguin in a private transaction in June 2008. This week, he took a 74 per cent loss on his investment.

Gauguin's 1892 landscape "Te Fare (La Maison)" fetched 20.3 million pounds ($US25 million), including commission, at Tuesday evening's sale of Impressionist and modern art at Christie's in London. Rybolovlev will net about $US22 million based on the hammer price. The auction house had estimated the value at $US15 million to $US22.4 million. The buyer was a client of Rebecca Wei, president of Christie's Asia.

Rybolovlev - with a fortune of about $US9.8 billion according to the Bloomberg Billionaires Index -- invested about $US2 billion in 38 works, from Leonardo da Vinci to Pablo Picasso. They were procured privately by Swiss art dealer Yves Bouvier, known for creating a network of tax-free art storage warehouses in Singapore and Luxembourg.

Two years ago, Rybolovlev sued Bouvier, alleging he was overcharged by as much as $US1 billion. Since then the Russian fertiliser magnate has been unloading works he acquired, some at record prices. He has already sold three for a loss totalling an estimated $US100 million. The five works at Christie's, all estimated below their purchase prices, were expected to deepen the loss.  

The art industry is closely watching the London auctions running this week and next as the year's first test of the global market following a significant contraction in 2016. Christie's sales fell 17 per cent to $US5.4 billion last year, while Sotheby's reported a 27 per cent decline to $US4.9 billion. Both houses saw steep declines in their two biggest categories: Impressionist and modern art, and postwar and contemporary art.

It was an reporting season that was "positive on all fronts," and it's just the beginnings, writes Credit Suisse strategist Hasan Tevfik:

​The earnings expansion is the third and final phase of the market cycle. The average earnings expansion goes for about 5 years. The current one has been in place for six months. It is usually a time when prices rise but P/Es fall.

Within the market stocks that have done well in the past, at least during the initial stages, are those that are under-valued and under-earning. We update our thoughts on stocks that fit the bill here.

Our new batch of stocks for the earnings expansion include Crown, Flight Centre, Mayne Pharma, Myer, Nine Entertainment and REA. Not the prettiest group of companies we agree, but that is exactly what we want right now. The beautiful defensive/growth stocks were sooo 2015. We add Mayne Pharma to our long portfolio and take losses in Syrah.

And here's a little more on Hasan & co's thinking around the earnings expansion:

The reporting season provided enough evidence to confirm the earnings expansion has begun, in our view. While it still remains largely concentrated in commodity stocks, we expect it will broaden into other areas of the market as we progress through the year.

A more positive global and local macro backdrop supports our view here. There is increasingly more evidence to show that economic activity in China, the US and Europe continue to expand. PMIs have so far been consistent with accelerating growth and there are early signs of business investment recovering.

For example, private business investment (excluding real estate) growth in China is now higher than where it was last year. Of course this follows a pick-up in public infrastructure spend, real-estate investment and corporate profits. Perhaps the recovery in our biggest trading partner is becoming self-sustaining.

Meanwhile in Australia, history suggests that an improvement in the terms of trade should eventually feed through to faster wage inflation. While we are not seeing this just yet, consumption growth is running at a solid pace as households lower their savings rate.

Still, bottom-up forecasts suggest there is much scepticism in the strength of the expansion. History suggests the risk to EPS forecasts remain to the upside. 

A mixed earnings season and a raft of profit downgrades has seen money flow out of smaller, riskier companies and back into the large, blue-chip stocks. 

Investors who did their homework and put their money into small cap stocks in the last few years have been duly rewarded, however this earnings season looks to hail the end of the small cap outperformance and a shift in sentiment.

"Large cap fund managers have been investing in smaller companies the last few years because their traditional holdings were looking a bit soggy," said Victor Gomes, portfolio manager of the UBS Small Cap fund. 

"This earnings season we've probably seen a bit of a reversal of that trend, especially as those managers realise the rewards lie for those who are picking the correct stocks."

Over the last six months small caps have slid 5 per cent while their bigger counterparts have eked out a 5 per cent gain.

While resources held up their end of the bargain, managing to meet or even smash their profit forecasts, the small stocks that once piqued the interest of dabbling fund managers have been savaged. 

Investors punished Genworth Mortgage Insurance after the company announced a 5 per cent dive in underlying net profits. The stock crumbled 18 per cent after the report and has only managed to claw back 3.5 per cent to trade at $2.83. 

Yowie Group, which attracted considerable support earlier in 2016 as the chocolate confectionery manufacturer signed key distribution agreements with US retailer Walmart, has suffered a near 30 per cent dive in value since the company reported at the beginning of February. Yowie management was forced to admit sales over 2017 were unlikely to live up to its original forecast. 

"Companies that missed their guidance have suffered terribly at the hands of investors who were relying on the eager market consensus, which has pushed up P/E," said John Murray, managing director of Perennial Value Management. 

"There's a general feeling of 'deliver or else' and if companies fail to deliver, their share prices get hammered."

Read more.

Federal Reserve governor Lael Brainard has joined central bank colleagues in painting a positive picture of economies at home and abroad that supported the case for an interest-rate hike "soon".

"Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path," Brainard said in a speech at Harvard University. "We are closing in on full employment, inflation is moving gradually toward our target, foreign growth is on more solid footing and risks to the outlook are as close to balanced as they have been in some time."

Brainard, who for months has played the role of lead dove at the Fed by arguing to keep rates lower for longer, said the US economy "appears to be in transition". If continued, that would allow the central bank not only to normalise rates gradually but also begin considering when and how to reduce the size of its $US4.5 trillion balance sheet, she said.

Her improved outlook is likely to add momentum to rising expectations among investors that the Fed will raise rates by a quarter percentage point when the Federal Open Market Committee gathers in Washington March 14-15.

Hawkish comments from New York Fed President William Dudley and San Francisco's John Williams on Tuesday already significantly boosted those expectations.

Yields on two-year US Treasuries have climbed about 0.14 percentage point this week, briefly breaching 1.30 per cent for the first time in more than seven years.

The probability of a March rate hike implied by prices in federal funds futures contracts soared to about 80 per cent, from 52 per cent on Tuesday.

Brainard said she expects the US economy to continue making progress toward the Fed's goals, driven by growth in consumption, adding that signs of improved business investment are rising.

"The contrast with the situation a year ago is sharp," she said.

A few economist reactions to the surprise narrowing in the trade surplus, which was largely due to a collapse in - very volatile - gold exports as well as sharply lower coal exports:

Rahul Bajoria, Barclays:

The ongoing recovery in exports remains dependent on buoyant commodity prices. However, the recent sharp decline in coking coal prices raises some concerns over its sustainability. In January, we saw some reversal in mineral exports, with iron ore, coal, and gold reporting sharp m/m declines. Non-rural goods exports, which cover the bulk commodities, fell 2% m/m, with shipments to China declining at the margin. Services exports were largely stable, and LNG shipments improved slightly.

Tom Kennedy, JPMorgan:

The weakness in exports is particularly surprising given the dual tailwinds of a soaring terms of trade and increased commodity output capacity. Iron ore values fell 2%m/m in January, while the impressive run in coal appears to be running out of steam as shipment values dropped close to 7%m/m. While these more fundamental drivers of the trade data were undoubtedly less favourable than we had hoped, we also note a sharp drop in the very volatile non-monetary gold category to the tune of 40%m/m (or $670 million) which helps to explain at least some of the weakness in exports.

Josh Williamson, Citi:

While we were correct in expecting an export correction based on lower iron ore and coal quantities, import growth was stronger than we expected. We would highlight the recovery in consumption imports particularly household electrical items, transport equipment and food and beverages. But the monthly result is still respectable despite missing the market consensus. The quiet achiever in the data was gas exports. These have risen for eight consecutive months and should rise further in the medium term. This will support GDP growth and according to the RBA will add around ½ppt to yearly growth each year in 2017 and 2018.

Kristina Clifton, CBA: 

The fall in exports in January was due to a 2% decline in the exports of rural goods and a 39% fall in non‑monetary gold (this is a small but volatile component of trade). Both coal and iron ore exports were reported to have fallen in the month. We expect to see bulk commodities prices ease further over the course of the year. Nonetheless we are likely to continue to see decent trade surpluses for the time being with commodity prices still around 45% above their most recent lows in late 2015.

George Tharenou, UBS:

The resurgence of commodity prices has been the main driver of booming export values (albeit total export volumes also jumped 9% y/y in Q4). But January's seemingly strange drop in resource exports, despite higher commodity prices, combined with a rebound of imports, dragged the trade surplus to 'only' $1.3bn. While 'normalisation' is likely ahead, the data to date implies a large net export drag on Q1 real GDP, and risk to our forecast Q1 current account surplus.

Paul Dales, Capital Economics:

The sharp drop in the trade surplus in January suggests that net exports will provide a sizeable drag on growth in the current quarter. And while rising consumption goods imports suggest that the surge in commodity prices is boosting domestic demand, this won't transform the outlook for the economy. We retain our view that real GDP will only grow between 2.0% and 2.5% this year.

Diana Mousina, AMP Capital:

Exports to China fell noticeably (accounting for around 43% of the total fall in exports) which could account for the decline in coal exports and are probably a one-off impact from a change in the timing of the Chinese Lunar New Year holiday (which fell in January this year, rather than the usual February timing). The volatile category of non-monetary gold exports also fell significantly in January.

Things are only going to get tougher for the likes of Target, Big W, Myers and David Jones, writes BusinessDay columnist Elizabeth Knight:

Australia's department store industry is facing the prospect of shrinking revenue in real terms over the next five years as it battles turbo-charged competition from online and offshore retailers combined with continued weak consumer sentiment.

It is an outcome for the industry that is clearly not sustainable and ultimately should prompt a major reshaping of the marketplace and questions about whether there needs to be a cull in the number of stores.

Two of Australia's major department store chains, Target and Big W, have sustained either poor profits or losses over the past five years, and their owners have issued no timeframes for a recovery. There is intense pressure on their parent companies, Wesfarmers and Woolworths respectively, to undertake some radical surgery on those brands even though they have already undergone a series of restructurings and management overhauls.

Over the past five years leading into 2017, industry research group IBISWorld is estimating Australian department stores grew annual revenue at only 1 per cent a year. And the next five years will bring revenue growth at an even more subdued annual rate of 0.7 percent, it predicts. Given inflation is currently running at 1.5 per cent a year, this means department store revenue would effectively be going backwards.

And this is despite the fact that the discount department stores have been continuing to grow their store footprint.

Over the past five years, the major culprit were initially the online-only competitors, which forced department stores into lower their prices.

Local department stores - particularly higher end department stores Myer and David Jones - responded relatively well and grew their own online sites and offerings.

But more recently it has been the foray of international bricks and mortar competitors that have captured market share in apparel, electricals and homewares.

And the likes of H&M, Uniqlo, Topshop and Gap have plans to continue their expansion in Australia, further increasing the pressure.

Read more.

Here's some more detail on this morning's building approvals figures, a segment of the economy that may prove critical the the country's fortunes this year and beyond.

Approvals for new housing rose an unexpected 1.8 per cent in January to 17,412 dwellings - led by apartments - but are still trending down, according to the Australian Bureau of Statistics' latest figures.

On a seasonally-adjusted basis, build approvals totalled 221,652 dwellings for the past 12 months, down from an annualised 230,813 in December.

Importantly, the rise in January was driven by a 6.2 per cent rise in non-detached dwellings - mainly apartments - which is a far more volatile measure. Year-on-year non-detached dwelling approvals are down 14 per cent.

Private sector housing approvals fell three per cent to be down 9.4 per cent year-on-year.

Unit approvals are trending down sharply in NSW and Queensland, but still rising modestly in Victoria.

"The gradual downward trend remains in place," Citi economists said. "Notwithstanding the rise in January, approvals are past their peak."

"However, the correction so far is mild and likely to remain so given the strong housing market on the east coast, with prices still rising briskly in Sydney and Melbourne, supported by low interest rates."

"Given the large number of apartment approvals, especially in NSW that are yet to start construction, we expect housing construction to contribute to growth again this year, albeit by less than last year," they added.

The January dwelling approvals numbers were released at the same time as the Housing Industry Association (HIA) released its forecasts for housing construction, which foreshadow a slowdown, especially in multi-unit development.

The HIA forecasts detached housing starts to ease by 1.7 per cent in 2016/17 ahead of a further decline of 7.3 per cent in 2017/18 while in the 'multi-unit' market, a 11.3 per cent decline is forecast in 2016/17 followed by a steep 25 per cent fall in 2017/18. 

The HIA said annualised level of commencements, which have fallen from a peak of 231,000 dwellings in March last year, was supportive of its view "that the current new residential building cycle is likely to have peaked in 2016". 

Salmon farmer Tassal is looking to raise up to $100 million to bolster its operations amid rising domestic demand for salmon.

The shares, which last fetched $4.90 and are up an impressive 18 per cent this year, are in a trading halt.

Tassal plans to raise $80 million via a fully-underwritten institutional share placement, and up to $20 million through a non-underwritten share purchase plan.

​The company said it had also established new credit lines, which it says "are expected to further strengthen the company's balance sheet and lower Tassal's risk profile".

The company expects the investment to boost revenue and operational earnings from 2017/18.

Tassal said it expects to invest $270 million in capital expenditure over next five years, and that its planned initiatives are expected to deliver an additional 2500 to 3000 hog tonnes of harvested salmon each year to FY21.

The company also said its plans to invest $53 million over 3 years to establish salmon farming operations in Okehampton and oceanic sites in Storm Bay in Tasmania.

Two major movers on the ASX today are Alumina and South32, which have surged by more than 10 per cent after reports emerged yesterday evening that China has ordered curbs on steel and aluminum output in as many as 28 northern cities during the winter heating season as it steps up its fight against pollution.

Shares in aluminium producer Alcoa in the US advanced most in a year after the CEO said the decision could be a "game changer" for the industry.

The cuts include halving steel capacity in four major cities, including top producer Tangshan in Hebei province,according to the people, who asked not to be identified because the matter is confidential.

The other cities are Shijiazhuang and Handan in Hebei, and Anyang in the neighbouring province of Henan.The plan calls for cuts in aluminum capacity of more than 30 per cent across 28 cities, and by about 30 per cent for alumina capacity, according to the people, who cited an order issued late last month by authorities including the Ministry of Environmental Protection and the National Development and Reform Commission.

"The cities mentioned in Hebei have 70 to 80 per cent of the province's total capacity," Yu Chen, an analyst with consultancy Mysteel Research, said.

"A 50 per cent cut will lead to huge production losses, which may lead to short-term tightness in steel supply," he said.

"It won't have an immediate impact, though, given the current heating season is ending soon," said Yu.

"The full impact will also depend on the detailed measures taken by local governments to implement the order."

"These measures, if well executed, could bring potential upside risk to aluminum, alumina and steel prices in China," analysts led by Jack Shang at Citigroup said.

The plan follows a directive last week in which China ordered steel mills in northern Hebei province and Tianjin municipality to curb output to ensure air quality during the annual parliament meeting in Beijing this month.

Alumina is at five-year highs at $2.02, while South32 shares are fetching $2.76.

APRA chairman Wayne Byres has said the banking and prudential regulator will continue to ping exhibiting strong growth in investor lending for as long as the housing market remains a key area of focus.

Appearing at the Senate Economics and Legislation Committee, Byres said that APRA would pull banks aside well before the growth of a bank's investor loan book hit the annual growth speed limit of 10 per cent as the regulators preference was to engage before needing to applying penalties.

Byres said that monitoring of loan growth was not limited to reported numbers but also "their projected rate of growth because we would rather have conversations with the institutions before the reach it (the cap) than after it."

The issue of caps on investor loan growth was thrust into the spotlight in February when CBA and its subsiduary BankWest announced changes to eligibility criteria that would slow the growth of these businesses in line with the caps set by the regulator back in 2014.

Byres said that the caps have had the desired impact in terms of forcing banks to adopt stronger lending standards and tempering the growth of investor activity in the property market. 

The securities regulator has said it is looking at mortgage lending standards across the banking sector after taking civil court proceedings against Westpac

The case "sends a message to the broader sector" that ASIC is prepared to "take anyone on," chairman Greg Medcraft told a parliamentary committee.

The regulator yesterday announced proceedings against Westpac over alleged failures to properly assess whether borrowers could afford their mortgages. The bank has said it will defend the case and it is committed to responsible lending.

Michael Saadat, a senior executive at ASIC, told the same parliamentary committee on Thursday the regulator expected to make an announcement within the next couple of weeks on its discussions with other banks.

"We have been looking at a range of lenders," Saadat said. The action against Westpac follows a 2014-15 probe into lending standards on interest-only mortgages at 11 lenders,including the nation's four biggest banks.

The case comes amid widening concern among both politicians and regulators about the foundations of Australia's soaring housing market. Fresh data released on Wednesday showed Sydney home prices surged 18.4 percent in the year to February, the fastest annual pace in 14 years.

Amid pressure from APRA, banks have been reining in lending to property investors and riskier interest-free orlow-documentation housing loans. APRA chairman Wayne Byres told the committee Thursday that some lenders were running very close to the regulator's 10percent limit on mortgage lending growth to investors.

Monitoring the housing market is "high on our priority list," Byres said, adding the regulator has "lifted our supervisory intensity."

"We can be more confident in the conservatism of mortgage lending decisions today relative to a few years ago," he said.

It's not only Trump relief that's perking up investors, data yesterday showed that manufacturing remains on a roll, pointing to strengthening global growth. 

Purchasing manager indices for the manufacturing sector, a key indicator of economic growth, were released around the world and they rose in nearly all the major advanced and emerging economies.

"The pick-up in global activity, which began in the middle of last year, seems to have lifted all the major advanced economies," said Capital Economic chief global economist Andrew Kenningham. 

It started with local data showing that activity in the manufacturing sector surged to its highest level in almost 15 years, with the performance of manufacturing index by the Australian Industry Group soaring by 8.1 points in February to 59.3.

Then came the closely followed official Chinese manufacturing PMI as well as the private Caixin version, which both rose more than expected, to 51.6 and 51.7 respectively. Japan's PMI also rose, to its highest in three year.

And overnight we first got upbeat European PMI surveys that showed eurozone factory activity rose to the fastest rate in nearly six years. This was followed by the Institute for Supply Management's (ISM) index of national factory activity in the US, which jumped to 57.7 last month, its highest level since August 2014.

And consequently the global manufacturing PMI as measured by Markit edged up to 52.9 in February, which is its highest level since May 2011.

​"The move further confirms our view that the global disinflationary shock of 2014-16 continues to fade," said JPMorgan economist David Hensley.

"The resulting pickup in corporate profitability that is boosting capital spending – alongside resilient solid consumer spending growth - is sending a strong signal to manufacturers."

Shares have followed the Wall St lead and jumped higher in early trade, with miners surging and banks also making strong gains.

The ASX 200 is up 63 points or 1.1 per cent in 5768, a welcome change from an extended period of weakness. Only one in eight of the top 200 are trading down.

South32 is leading the charge, up 7.6 per cent to be the best performer in the top 200, helped along by a couple of positive broker notes. BHP is up 2.7 per cent and Rio 2.9 per cent, while Fortescue has only edged higher, which is an impressive achievement when you consider the iron ore miner is trading ex-dividend today (the chart shows its performance factoring in the ex-div effect).

Indeed, the gains on the bourse are even more impressive when you consider the likes of Woolies, Woodside and Lendlease are also trading ex-div.

The Big Four banks are all higher by between 1.1 and 1.4 per cent, and Macquarie is 2.1 per cent higher. The only blue-chip blip is Telstra, which is 0.2 per cent lower.

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IG analyst Gary Burton wonders what it will take to shake the ASX out of its recent malaise:

The 5833 level remains the technical resistance level for the ASX200. With the US markets closing on the highs for the session, our market has a real shot at 6000 points in the coming months.

Many traders will be asking what it will take to lift the ASX200 out of this malaise of constant retracements. Forward earnings per share for 2017 is projected to grow by 23% from this year's average five per cent.

The good gross domestic product print at 2.4% was met with little interest by the buyers in the market. In a nutshell Australia is one of the best performing economies in the world with uber low interest rates, solid employment levels, and political stability.

Is it the level of household debt that has the market worried? Currently the Australian household debt is 123% of GDP. Household debt To GDP in Australia averaged 69.51 percent of GDP from 1977 until 2016, reaching an all time high of 125.20 percent of GDP in the first quarter of 2016.

The answer may still be in the property market that remains in its own bull market. History shows that major equity market retracements are preceded by a property market crash. The key ingredient missing for this potential outcome is high interest rates.

The great unknown: Donald Trump has promised "phenomenal" tax cuts in the US very soon. Would this be the great unknown the markets are concerned about? Slashing tax rates in a large manufacturing base such as the US will make those who trade with the USA suddenly very uncompetitive and now having to compete without a free trade agreement.

Read more.

Stockland boss Mark Steinert says curbing the excesses of negative gearing on property investments should be considered in an effort to improve Australia's housing affordability problem.

Mr Steinert, head of the country's largest residential developer, said any reform should be part of a wider package of tax reform measures, has also been a big advocate of increasing supply and improving planning to help solve the affordability problem.

"Some type of sensible and fair cap on negative gearing isn't unreasonable," Mr Steinert told The Australian Financial Review. "If people are taking advantage of the system and having a disproportionate influence … Putting some sort of restrictions on that isn't unreasonable, but they have to be thoughtful and not knee-jerk."

New house price figures on Wednesday starkly showed the lack of affordability. Home values in Sydney jumped 2.6 per cent last month alone in Sydney, in contrast to an average annual wage growth of just 1.9 per cent, CoreLogic figures showed. The record low yields on residential property suggested investors were counting on negative gearing to offset cash losses, CoreLogic head of research Tim Lawless said.

"It could be a dollar-value limit on deductions, or the number of properties that can be negatively geared," Mr Steinert said.

Like many in the property industry, Mr Steinert said boosting housing supply was crucial and that reforms to planning processes would speed up production and cut land costs.

Economist Saul Eslake, an advocate of changes to negative gearing, said Mr Steinert's comments were "ground-shifting".

"It's breaking the hitherto immutable wall of opposition from the property industry," Mr Eslake said. "Given that he sells primarily to owner occupiers rather than investors, he's in a very good position to judge what the impact of the existing arrangements have been on the relative capacity to buy of owner occupiers versus investors."

Even so, changes of the sort Mr Steinert proposed would only have a minor effect on property investment overall, Mr Eslake said.

"It would do something to knock out the most egregious abuses of negative gearing for tax avoidance purposes," he said.

Read more at the AFR here.

And here's The AFR's Washington correspondent, John Kehoe, take on the overnight action:

Donald Trump appears on track to blow out the US budget deficit and debt, in a Reagan-like fiscal loosening that could drive up global interest rates higher than anticipated.

Not that stock investors seem to care. The Dow Jones burst through a record 21,000 points Wednesday in New York (Thursday AEDT) following Trump's toned down speech to Congress. 

Yet unless fiscal conservatives in Congress act on their concerns about Trump's unfunded big spending and tax cut plans, Australian home borrowers will be among those to feel the reverberations.

Economist Warwick McKibbin, a former Reserve Bank of Australia board member, is visiting Washington and reckons Trump is about to unleash a big fiscal stimulus that will propel the US dollar, inflation and global interest rates.

"Rising global long-term interest rates will inevitably be reflected in rising mortgage costs in Australia," says McKibbin.

When president George W. Bush pushed a second round of tax cuts in 2003, former vice president Dick Cheney famously said: "Reagan proved that deficits don't matter."

Barring a sharp reversal from his early budget spending and taxing decisions, Trump is poised to test that claim.

To date, he has shown little appetite to act on campaign rhetoric about cutting the $US20 trillion gross government debt.

If Congress allows Trump to massively cut corporate and personal taxes, boost military spending and pursue "big" infrastructure investment, the budget will run deeper into the red.

Trump's campaign pledge to slash the corporate tax rate to 15 per cent, collapse seven individual rates into three and eliminate the estate tax would cost between $US4.4 trillion and $US5.9 trillion over a decade according to the Tax Foundation.

Most mainstream economists on the left and right agree it will be impossible for faster economic growth alone to close the budget deficit and shrink the debt.

"Growth is important but it's not going to solve the tough choices they're going to have to make on the budget," says American Action Forum president Doug Holtz-Eakin, a former chief economist of president Bush's council of economic advisers.

Read more at the AFR here.