The ASX reversed early losses to close higher after morning news of a Republican Party draft bill replace Obamacare sparked a 50-point rally in the benchmark index.

The rebound was led by the big four banks and a 1.1 per cent gain in bio-pharmaceutical company CSL, as the S&P/ASX 200 index closed up 15 points, or 0.3 per cent, at 5761.

Westpac climbed 0.8 per cent, NAB 0.7 per cent, and ANZ added 0.5 per cent, while CBA ended the day only marginally higher. Westfield, which fell 1.5 per cent on a broker downgrade, and the major miners, BHP Billiton and Rio Tinto, were the primary drags on the index as most stocks ended the session higher.

The impressive morning bounce looked to have been investors responding positively to any signs of policy progress in Washington after a chaotic start to the new administration under President Donald Trump.

"It's all about reducing political risk," Perpetual head of investment strategy Matt Sherwood said. "Investors hope that congress can work well with the Republican president."

"The proposed bill would only work at the very margin in improving the US budget balance,"Mr Sherwood said. "It won't change the US growth dynamics, and probably won't on the whole change the trajectory of US earnings, either."

The sharp bounce on the ASX was timed almost perfectly with the breaking news out of Washington.

"Markets probably responded to this by thinking that this is a first step to progress on a number of fronts," Mr Clarke said. "It reduces the timing uncertainty and hopefully reduces any kind of gridlock, and I think that was really the rationale for why the markets liked it: we are starting to see the ball rolling."

"If they can get this done and through the congress and signed off by the president, then the focus then changes to tax cuts, regulatory reform, stimulus programs - all which are growth friendly," Mr Sherwood said.

The other major news of the day was the Reserve Bank of Australia in its monthly meeting held its cash rate target steady at 1.5 per cent, surprising noone on the day. The RBA's accompanying statement did little to dissuade the consensus view that the central bank remains firmly on hold as it balances booming property markets in Sydney and Melbourne - an increasing concern - with a mixed employment picture and sluggish, below-target inflation.

Weighing on the sharemarket were a number of stocks trading ex-dividend, including the likes of Qantas, Medicare Private, Blackmores and Ramsay Health Care.

Here are economist reactions to the RBA statement:

Daniel Blake, Morgan Stanley:

The RBA was out of play today (and through 2Q), with the statement unchanged in tone and substance. This may let down hawks hoping for a December hike, but we were also disappointed by the lack of signs that further supervisory actions could be used to quell Sydney and Melbourne housing markets. We note that this does not rule out further action in coming months, with the responsible entity being the Council of Financial Regulators.

Sally Auld, JPMorgan:

The commentary on housing was a little more interesting, in that the RBA's confidence around the impact of supervisory measures around mortgage lending now seems lower. We think this change is reasonably significant, in that it reads as an acknowledgement that the current supervisory regime is doing something to improve lending standards, but not enough. And with the unemployment rate unchanged over the last year and at least 0.5%-pts above NAIRU and core inflation forecast to remain sub 2% for at least the next two years, rate hikes are clearly not the appropriate tool to manage these risks. So our interpretation would be that this opens the door to something more on the macro-prudential front at some point, although the timing and nature of any change are unclear.

Annette Beacher, TD Securities:

To shift the RBA into a more hawkish stance we need to see a noticeable improvement in full-time hours worked. The February employment report is released March 16, and we did spot signs of life in the January report.  We see the next move being up for the cash rate due to rising financial stability risks, strong national income growth, and inflation swiftly returning to the target band.

Paul Dales, Capital Economics:

The statement remained fairly balanced, but recent speeches have made it clear that the RBA doesn't intend to cut interest rates again. We think the combination of weaker underlying inflation and a softer housing market will prompt it to change its mind later this year. At the least, rates won't be increased this year or next. This explains while we are sticking to our forecast that the RBA will cut rates to 1.0% this year despite Lowe's suggestions to the contrary. If we are right, then this would catch the financial markets on the hop and could contribute to a sharp weakening in the Australian dollar, from US76c now to around US65c by the end of this year. 

Su-Lin Ong, RBC Capital Markets:

While the wording is largely unchanged we think the commentary around the labour market, wages and inflation should not be overlooked. They continue to capture a sense of uncertainty over labour market outcomes and the composition of job creation which is intertwined with weaker than expected wages growth and a slight nudging down of the RBA's core inflation forecasts over the medium term. With the wage/unit labour cost dynamics likely, in part, to capture a structural element and need for AU to be more competitive, the risk is for sub target core inflation to persist for longer than expected. The risk of further easing remains, especially when the housing construction cycle turns, the most recent tightening in lending standards/lift in rates tempers lending, and domestic demand stays tepid as we expect.  

Ivan Colhoun, NAB:

The bank is concerned that a further cut in interest rates could induce some households to borrow beyond their means. The bank is thus prioritising its concerns about household balance sheets at this point. The governor has also noted that if the unemployment rate were to begin to rise, then the bank could reassess the question about the time taken to return to the inflation target. It's likely that the RBA will leave interest rates unchanged at least for the next six months. NAB's forecasts for economic growth in 2018 are weaker than those of the RBA, largely because we expect a drag from lower commodity prices and a downturn in the housing construction cycle. This could see the RBA again considering a further cut to interest rates late this year.

Rahul Bajoria, Barclays:

Overall, we think the tone of the statement was relatively more upbeat compared with statements three to six months ago. The RBA continues to see an ongoing global recovery, and sees higher commodity prices providing "a significant boost" to national income. On the domestic front, the RBA acknowledged the better-than-expected growth outturn in Q4, and also indicated that business and consumer surveys point to a continuing recovery in growth, although household income growth remains low. We believe the RBA will closely watch the housing market for cues on monetary conditions in the next three months.

Stephen Halmarick, CSFGAM:

With no forward guidance, we continue to expect no change in the 1.5% cash rate for 2017. At some stage in the future the RBA Governor's mind is likely to turn to the question of when he starts raising interest rates. However, given the inflation, household balance sheet and labour market outlook, we are not expecting this until 2018. One factor that may weigh into the RBA's deliberation is a desire to keep the Australian cash rate above that of the US.

Regulators are "increasingly likely" to lower the speed limit on investment property lending growth from the current 10 per cent, Morgan Stanley analysts argue.

The broker says the rhetoric from APRA is getting stronger, with the chairman stating last week that "strong competitive pressures are producing higher rates of lending growth again… we therefore see no room for complacency".

So what would happen if investment lending growth was limited to, say, 5 per cent?

The banks would need to cap their investment lending at 4 per cent to play it safe, the analysts say, which combined with around 6 per cent growth in owner-occupied lending would mean total home loan growth could slow to around 5 per cent from about 6.5 per cent now.

Based on the past six months of investor lending, CBA and Westpac "face the greatest threat to growth" as they are above the theoretical 5 per cent limit, while NAB is "broadly inline" and ANZ is below.

The analysts add that the banks are likely to continue hiking lending rates.

"With borrower demand still strong and few options for the banks to expand margins elsewhere, we think more targeted repricing is likely to continue in 2017."

They will help lift margins and earnings, however, the analysts add that "repricing too far risks further slowing housing loan growth".

The spike higher in the Australian dollar just before the RBA's rates announcement raised a few eyebrows among traders.

The Aussie suddenly jumped a quarter of a cent to the day's high of US76.25¢ three minutes before the decision, only to retreat just as quickly on the decision to currently fetch US76.05¢.

"To accelerate above the US76¢ handle when no change was expected was probably the more interesting part about the release," said ThinkMarkets senior analyst Matt Simpson.

"Yet it could likely be explained with a large order taking a punt for a hawkish statement, or perhaps algos will get blamed again for spoofing the market."

The administrators of the Arrium Australia business say the final two shortlisted bidders are both seeking to buy the operations in "one line" which includes the Whyalla steelworks and its associated mining operations.

A note to Arrium staff from KordaMentha seen by The Australian Financial Review said that the administrators are aiming to have the sale finalised by June 30, 2017. It now wants unconditional bids from the remaining duo, the identities of which it was "unable to disclose" even to staff, because of the sensitive nature of the process.

"In conjunction with Morgan Stanley, the administrators have shortlisted two bidders to progress to the next stage of the sale process," the internal note to Arrium staff said.

"We can confirm that both bidders are seeking to purchase the Arrium Australia business in one-line," the administrators said.

"The outcome of the next stage of the sale process will be to receive unconditional bids that can be accepted and completed swiftly".

It is understood the two final bidders are United Kingdom steel and commodities trading company Liberty House in conjunction with its stablemate company SIMEC, and an entity led by South Korea's Posco. Liberty House executive chairman Sanjeev Gupta told the Financial Review in mid-February that Liberty/SIMEC were pursuing all of the assets and wanted to own them for the long term. Liberty House has been at the forefront of a mini-revival in Britain of steelmaking and enhancing the country's industrial capability.

KordaMentha said in the note "the need for confidentiality is critical and we are therefore unable to disclose names of the bidders or provide further details of the bids at this sensitive stage of the process".

Cost-cutting in corporate Australia has run deep for the past few years in a low-growth environment, but what happens when the razor gang needs to look a bit harder after exhausting most of the obvious options?

Pulling out costs has been a central part of the playbook for most executives as a way to preserve margins at a time when revenue growth has been relatively weak, but that can only go so far.

A new mantra has now emerged: cost containment instead of cost-cutting.

Macquarie Capital says most companies are now in the "harvesting" stage of cost-out programs that have already been implemented, with productivity gains now flowing through from those. But big, new cost-cutting programs are becoming more rare.

Companies are doing a good job on cost control and keeping a lid on capital spending according to Macquarie. Those collecting a tick from Macquarie for delivering "positive cost surprises" were from a diverse spread of industries.

Rail freight operator Aurizon, insurer AMP, APN News & Media and building products firm Boral were among those lauded for their pruning. Share registry company Computershare, retailer JB Hi-Fi and toll road developer Macquarie Atlas were also tight on costs.

Macquarie observed that there weren't many new cost-cutting programs announced over the past few weeks as companies announced their first half results and of those that did, the size of the cost-cutting is "generally getting smaller".

It also put together a list of Australian companies that needed a bigger knife and a more aggressive internal razor gang.

Disappointments on the "cost out" front came from logistics group Brambles, which is battling against structural shifts in its industry from the likes of Amazon and a higher repair bill as more pallets than it expected were returned to its depots. Flight Centre was another firm flagged by the analysts.

Other laggards on costs according to Macquarie included building products firm James Hardie and gambling companies Star Entertainment and Tabcorp.

Forget the reality TV show that is the big bank bosses' star turns in Canberra this week, the real drama is happening in loan standards, writes Bloomberg Gadfly columnist David Fickling:

The one "X factor" that makes Australia's banks stand out from the global crowd is the speed at which their loan books have grown.]

The stock of residential home loans was about 30 per cent bigger in local-currency terms at the end of June 2016 than it was in December 2012, according to IMF data. Banks in the US, the UK and Canada, meanwhile, increased their lending by 7.1 per cent, 10 per cent and 20 per cent respectively.

That breakneck growth has been accompanied by an often lax approach to underwriting. Loans originated via third parties, such as mortgage brokers and those granted outside normal serviceability criteria, are among the most likely to result in default. And yet they've been on the rise, from 36 per cent and 2.4 per cent of new term loans respectively in the March quarter 2008, to 47 per cent and 3.5 per cent in the December quarter last year.

Interest-only loans, which strip borrowers of an equity buffer should prices fall, also make up a persistently large share of the total, at a fairly consistent 40 per cent of new lending for almost a decade.

It's probable the real numbers are even worse. A UBS study last year found that 28 per cent of surveyed mortgage applicants said they'd submitted information that wasn't wholly accurate. Mortgage fraud accounts for about 13 per cent of all fraud cases identified in a 2016 study by data analytics business Veda.

This activity, with its echoes of the subprime lending frenzy that preceded the 2008 financial crisis, is probably what parliamentarians in Canberra should be worried most about. It gets surprisingly little attention, though -- perhaps because few politicians want to be the killjoys who take away the punch bowl from voters looking to join the real estate party.

Regulators can afford to be more aggressive. APRA announced macro-prudential measures in 2014 to limit the growth in investment mortgages, which managed to reverse loan growth in that area for three quarters. ASIC last week started proceedings against Westpac, alleging it was making loans that borrowers might not be able to repay. 

Such activities will attract squeals of protest from banks, but that's a sign regulators are doing something right. Like the winner of any reality show, they're not here to make friends.

It looks like the news that Republicans have unveiled legislation to repeal and replace Obamacare has sparked the turnaround in the market.

The ASX rose around 40 points just after news hit the wires, lifting the market into the black.

While it's likely to take a while, and possibly a few changes, for the Republican bill to turn into law, it does show movement in Washington.

Investors will be hoping that means legislators can soon turn their attention to Trump's pro-growth plans such as tax cuts and stimulus spending.

CSL is one of the bigger winners this morning, up 1.5 per cent, while the banks are now all in the black after earlier posting losses.

The US Republican party has unveiled its long-awaited legislation to repeal and replace the Affordable Care Act, taking them a step closer to fulfilling a vow they've been repeating since the health law's passage in 2010.

Called the American Health Care Act, House Republicans' proposal released this morning would unwind much of Obamacare over the next three years. To help people afford insurance, they are proposing a refundable, age-based tax credit. The legislation would also end a requirement to have coverage, and would eventually eliminate many taxes used to fund the 2010 law.

The proposal is the most comprehensive look yet at how the GOP will approach replacing the health law, also known as Obamacare, which brought coverage to an estimated 20 million people. Republicans blamed the law for rising insurance premiums and high patient out-of-pocket costs, and criticised its requirement that everyone have health insurance or pay a penalty.

A copy of the legislation, which is in two parts, and two House committees will start work on moving it forward on Wednesday. Key provisions include the following:

• An advanceable, refundable tax credit to help buy insurance for individuals, that phases out for people making more than $75,000 ($150,000 for a couple filing jointly). The size of the credit grows with age and the number of people in a family.
• Immediately ends a requirement that individuals have insurance coverage and another rule that requires some businesses to offer coverage to their workers.
• Expands the allowable size of health-care savings accounts that can be coupled with high-deductible insurance plans, up to $6,550 for an individual or $13,100 for a family.
• Winds down Obamacare's expansion of Medicaid. Changes it to a per-capita system, where states are given a set amount for the number of people in categories including the disabled, elderly, childless adults and pregnant mothers.
• Requires "continuous" insurance coverage. Individuals who go uninsured face a 30 percent higher premium as a penalty.
• Gives states a $100 billion fund over a decade to help lower-income people afford insurance, and to help stabilise state insurance markets. The fund could be used to help lower patients' out of pocket costs or to promote access to preventive services.

The nonpartisan Congressional Budget Office hasn't yet evaluated the bill, so estimates of the impact on government spending and revenue and how many people will gain or lose insurance coverage are still forthcoming. Republicans plan to move ahead with the first steps of considering the bill in committee without such a budget score.

With the Aussie dollar the big outperformer this year, will the RBA sound the alarm today on the currency's rise?

The currency is trading at US75.82¢, about 1.5 cents below this year's high, but the Aussie is up against all major peers in 2017. The RBA board meets today and will publish its rates decision at 2.30pm AEDT.

But most economists don't think the rise will alert the central bank as it came with stronger commodity prices as well as a pick-up in domestic economic growth.

"The RBA statement will likely have little impact on the Australian dollar today, with currency comment unlikely to change and the board's bias remaining little changed," ANZ says.

Nevertheless, the market will be paying close attention to the language in governor Lowe's statement to see whether last week's stronger than expected December quarter GDP will spark a change the tone, perhaps indicating a more hawkish bias.

NAB currency strategist Rodrigo Catril says: "We don't think so, indeed, we expect the Bank to remain neutral with the final paragraph in the governor's statement  assessing current monetary policy settings as consistent with the Bank's policy mandates."

The $100 million legal battle over the share-price collapse of listed law firm Slater and Gordon has taken a bitter twist over an allegation of a serious conflict of interest.

Slater and Gordon faces a class action led by its No.1 rival, Maurice Blackburn, after the collapse of its share price last year.

In court on Monday, Slater and Gordon's legal team flagged concerns that Maurice Blackburn might have a conflict of interest representing shareholders in a case against its biggest competitor.

The accusation came as lawyers for debt-strapped Slater and Gordon also revealed that it would be four weeks until they could mediate with Maurice Blackburn with the possibility a settlement could be reached after that time.

Maurice Blackburn launched the class action on behalf of aggrieved shareholders in the group last year. Slater and Gordon is in financial strife after its disastrous acquisition of UK firm Quindell led to $1 billion-plus writedowns, a string of financial losses and a major investigation by ASIC.

Since April 2015, its shares have fallen from more than $8 to yesterday's closing price of 8¢, which followed a 16 per cent drop on Monday.

The spur for the conflict-of-interest allegation was a move by Maurice Blackburn to apply to the Federal Court for details on Slater and Gordon's insurance policies and documents relating to the debt-strapped law firm's rescue deal with its bankers.

Its application came after Fairfax Media revealed a rescue package for the debt-strapped law firm will use a legal precedent to ring-fence the company's assets from secondary creditors including class action claimants.

Fairfax Media also revealed Slater and Gordon is expected to reach an in-principle agreement with its bankers for a debt-for-equity swap by March 17.

Lawyer for Slater and Gordon, Leon Zwier of Arnold Bloch Leibler, said he had concerns about Maurice Blackburn representing shareholders and that should also be discussed in the mediation talks.

"It's like asking Channel Seven to play a role in the reconstruction in Channel Nine," Mr Zwier told the court.

Read more.

Commonwealth Bank chief executive Ian Narev says his bank is working to regain public trust following a string of scandals but acknowledged no senior executive had been removed.

Narev began his appearance before a parliamentary committee today by stating that CBA was continuing its efforts to rebuild the trust of its customers, but it had found no systemic issues in the bank.

Under questioning from committee chairman David Coleman, Narev said no senior executive had been removed and argued that he did not believe senior executives who oversaw serious scandals should be named.

"[Scandals in] Comminsure, wealth management, rate rigging  - there were no consequences for senior executives?" Coleman asked.

"Correct," Narev responded.

More on the banking inquiry at the AFR's live blog

Shares have opened lower, led down by a slide in mining stocks following softer commodity prices and some wobbles on Wall Street overnight.

The ASX is down 0.3 per cent at 5727.6, with the materials sector's 1.2 per cent drop weighing heaviest.

There is universal agreement that the RBA will not change interest rates this afternoon, to the point of complacency, says CMC chief market strategist Michael McCarthy.

"However a risk to the market performance today is the board taking a leaf from the Fed play book, and increases forward signalling. Any suggestions that the RBA is moving to a tightening bias could rattle the cage."

Among the major miners, BHP is down 1.4 per cent, Rio has lost 1.3 per cent and Fortescue has dropped 1.2 per cent. 

The big banks are about 0.2 per cent lower, while Telstra has slipped 0.2 per cent. Qantas, trading ex-dividend is down 2.5 per cent.

Utilities and health-care stocks are among the winners, with CSL up 0.5 per cent, Cochlear gaining 1.6 per cent and AGL Energy rising 0.9 per cent.