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Australian market at five-year high -

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ELEANOR HALL: Now to the economy: and the Australian share market has jumped to a five year high.

Investors are banking on the US Federal Reserve extending its economic stimulus program into next year as the economy adjusts to the end of the congressional deadlock that took the US to the brink of defaulting on its debt obligations.

Joining us now with the details is our business editor Peter Ryan.

So Peter it's a big turnaround from this time last week isn't it?

PETER RYAN: Well that's right. And it's been a slow and steady recovery Eleanor, but this morning the All Ordinaries Index is up 0.7 per cent at 5,356. Now this is the highest level since August 2008 - a month before the collapse of Lehman Brothers sparked the global financial crisis.

There was a strong lead in from Wall Street after the last minute deal between president Obama and the US Congress, and on Friday US time the S&P 500 hit a record high.

Now the risk of another budget battle on Capitol Hill and the risk of another debt default time-bomb have been kicked into the new year.

But the economic damage to the US - one conservative estimate is US$20 billion - means the US Federal Reserve is now highly unlikely to end its money printing program until around about mid-2014.

Also, China is continuing to nip at America's heels after posting economic growth of 7.8 per cent in the year to September, and the NAB's chief markets economist Rob Henderson says confidence about China is another reason investors are coming off the sidelines.

ROB HENDERSON: The Chinese numbers, I think, are feeding into this view that the global economy is looking a bit better, and in particular a very small but nonetheless positive bounce in GDP in China in the last quarter I think has people believing at the moment that China's not actually going backwards. It seems to be stabilising at around 7.5 per cent GDP growth. So 7.5 per cent is great for an exporter like Australia.

PETER RYAN: Well given that uncertainty from the US with a partial government shutdown and the prospect of a debt default, how is the world now focusing on China for some sort of relative stability?

ROB HENDERSON: Well I think it's fair to say that since the global financial crisis, most of the world's growth's come out of Asia, and China in particular. So the slowing in China had many people nervous over the past year or so. But recently it just appears like it's stabilised, and it's still a very large and expanding market for exporters like Australia.

ELEANOR HALL: That's the chief markets economist at the National Australia Bank, Rob Henderson

Now Peter, that growth from China has pushed up the Australian dollar. Will the Reserve Bank board try to move to address that?

PETER RYAN: Well this is the big question, Eleanor, as we look at any tiny piece of data over the next couple of months to see if that gives a signal about what the Reserve Bank can do. Now, the Australian dollar went as high as 96.75 US cents after that news from China - it wasn't that long ago that the Australian dollar was down at 88 US cents. And this comes at a time when the Reserve Bank has been cutting the cash rate to push the Australian dollar lower.

It is of course a double-edged sword. The RBA wants to see China maintain steady growth, given that this underpins Australian iron ore and coal exports. But it knows the high dollar is still hurting local exporters but it's reluctant to cut the cash rate again because of concern about rising property prices, particularly in Sydney and Perth.

Now we'll be seeing the latest inflation data from the ABS on Wednesday. If inflation remains benign then the RBA has a trigger to cut rates again. But most economists either think the cutting cycle might be over or there'll be perhaps one more in the new year.

ELEANOR HALL: Peter Ryan, our business editor, thank you.