Australian finance glossary

Plain-English definitions of the market and money terms we use in the daily brief — no jargon, no fluff. Want the deeper how-and-why? Read Learn the fundamentals.

A-REIT

Australian Real Estate Investment Trust — a listed way to own property (offices, malls, warehouses).

The longer story: Property & interest rates

APRA

Australia's banking regulator; its lending rules are a major lever on house prices.

How it actually works: Superannuation — the $4 trillion force

asset allocation

The split of a portfolio between asset types — shares, bonds, property, cash. It drives most of a portfolio's long-run risk and return.

ASX 200

Index of the 200 largest companies on the Australian Securities Exchange.

AUD/JPY

The Aussie dollar against the Japanese yen — a sensitive gauge of global risk appetite and the carry trade.

First principles: The carry trade & the yen

basis points

Hundredths of a percent. 25 basis points = 0.25%.

bid-ask spread

The gap between the highest price buyers will pay (bid) and the lowest sellers will accept (ask). A hidden cost of trading — wider spreads cost you more.

Brent

The global benchmark crude oil price.

The mechanism behind it: Oil & energy prices

brokerage

The fee a broker charges to execute a share trade. In Australia it ranges from $0 to ~$30 per trade depending on the platform.

BTC

Bitcoin — the largest cryptocurrency; trades 24/7 so it acts as a risk-appetite 'canary'.

The longer story: Crypto as a risk asset

capital gain

The profit from selling an asset for more than it cost you. The paper version — before you sell — is 'unrealised'.

carry trade

Borrowing in a low-rate currency (often the yen) to invest in higher-yielding assets. Unwinds can trigger sharp sell-offs.

cash rate

The interest rate the RBA sets; the anchor for Australian mortgage and savings rates.

How it actually works: Interest rates & the cost of money

CGT

Capital Gains Tax — tax on the profit when you sell an asset for more than you paid. In Australia it's taxed as part of your income, not at a separate rate.

CGT discount

Hold an asset for more than 12 months and (for individuals) only half the capital gain is taxed.

CHESS

The ASX's ownership register. CHESS-sponsored shares are recorded in your name (with a HIN), rather than pooled under your broker's custodian.

comparison rate

A mortgage rate that folds most fees into the headline number, so loans can be compared like-for-like. Required by law in Australian loan ads.

compounding

Earning returns on your returns. Small, repeated gains snowball — the engine behind long-term investing.

concessional contributions

Pre-tax money going into super — employer contributions plus salary sacrifice — taxed at 15% inside the fund, capped at an annual limit.

CPI

Consumer Price Index — the main measure of inflation.

First principles: Inflation & CPI

debt recycling

Gradually converting non-deductible home-loan debt into deductible investment debt, e.g. paying down the mortgage and re-borrowing to invest.

diversification

Spreading money across different assets, sectors and countries so one blow-up doesn't sink the whole portfolio.

dividend yield

A company's annual dividends as a percentage of its share price. A $100 share paying $4 a year yields 4%.

Division 293

An extra 15% tax on concessional super contributions for high earners (income plus contributions above $250,000).

dollar-cost averaging

Investing a fixed amount at regular intervals regardless of price — you buy more units when markets are down, fewer when they're up.

dominance

Bitcoin's share of the total crypto market value.

DRP

Dividend Reinvestment Plan — instead of receiving dividends as cash, you automatically get extra shares, usually with no brokerage.

DXY

US Dollar Index — the USD's value against a basket of major currencies.

The mechanism behind it: The US dollar & the DXY

emergency fund

Cash set aside for the unexpected — job loss, car repairs, vet bills — typically parked in a high-interest savings or offset account.

equity (home)

The slice of your home you actually own: its market value minus what's left on the mortgage. Banks will often lend against it.

ETF

Exchange-Traded Fund — a basket of shares (or bonds, gold, etc.) you buy and sell on the ASX like a single share. Most track an index rather than trying to beat it.

FOMC

The US Federal Reserve's rate-setting committee.

The longer story: What central banks do

franking credit

A tax credit attached to Australian dividends, reflecting company tax already paid. Stops the same profit being taxed twice — once at the company, again in your hands.

fully franked

A dividend where the company has paid the full 30% company tax on it, so the maximum franking credit comes attached.

index fund

A fund that simply copies a market index (like the ASX 200) instead of paying someone to pick winners. Low cost, no stock-picking.

iron ore

Australia's biggest export, used to make steel. Its price (driven by Chinese demand) heavily affects the AUD and miners.

How it actually works: Iron ore & China

LMI

Lenders Mortgage Insurance — a premium (often thousands) charged when borrowing above ~80% LVR. It protects the bank, not you.

LVR

Loan-to-Value Ratio — the loan as a percentage of the property's value. A $480k loan on a $600k home is an 80% LVR.

MER

Management Expense Ratio — the annual fee a fund quietly deducts, quoted as a percentage. An MER of 0.10% means $10 a year per $10,000 invested.

negative gearing

When an investment property's costs (interest, upkeep) exceed its rent, producing a loss that can be deducted against other income.

non-farm payrolls

The headline US monthly jobs number (excluding farm workers). A big market mover because it shapes Fed rate expectations.

offset account

An everyday bank account linked to a mortgage; the balance offsets the loan, so you're only charged interest on the difference.

OIS

Overnight Index Swap — a market-implied measure of where traders expect the cash rate to be. Used to read what's 'priced in'.

PBoC

People's Bank of China — China's central bank; its daily currency 'fix' and policy moves ripple into AU commodities.

First principles: What central banks do

PCE

The US Fed's preferred inflation measure (Personal Consumption Expenditures).

The mechanism behind it: Inflation & CPI

positive gearing

When an investment property's rent covers all its costs and then some — the surplus is taxable income.

preservation age

The age (60 for most people) at which you can start accessing your super, provided you meet a condition of release like retiring.

RBA

Reserve Bank of Australia — sets the cash rate and runs monetary policy.

rebalancing

Periodically nudging a portfolio back to its target mix — trimming what's grown, topping up what's shrunk.

redraw

A mortgage feature that lets you pull back extra repayments you've made ahead of schedule. Similar effect to an offset, but the money legally sits inside the loan.

refinancing

Switching your mortgage to a new lender (or renegotiating with your current one) for a better rate or features.

risk-off

A defensive mood where investors sell risky assets and seek safety (bonds, USD, gold).

The longer story: Risk-on vs risk-off

risk-on

A market mood where investors buy riskier assets (shares, AUD, crypto) expecting gains.

How it actually works: Risk-on vs risk-off

S&P 500

Index of 500 large US companies — the main barometer of Wall Street.

First principles: How shares are valued

salary sacrifice

Directing part of your pre-tax salary into super (or other benefits) instead of taking it as cash — taxed at 15% in super rather than your marginal rate.

SPI futures

ASX 200 futures traded overnight; the best pre-open guide to how the AU market will open.

spread

The gap between two interest rates or prices — e.g. bank funding spreads add to mortgage costs above the cash rate.

super guarantee

The compulsory percentage of wages employers must pay into super — currently 12%.

trimmed mean

A 'core' inflation measure that strips out the most extreme price moves; the RBA's preferred gauge.