Tony Cole: I think on the marginalpropensity to save – we did see a big increasein saving yesterday in the nationalaccounts. But we don’t know where thatcame from, I mean that could just be allthe interest rate cuts .Tony Harris: That’s right, threequarters of people haven’t reduced theirrepayments to the bank.Colin Tate: So, Don Russell …youwere there when this whole plan wasconceived, when 15 per cent SG wasconsidered a minimum requirement. Iimagine you were grossly disappointedwhen the Howard Government did what it did.

Can you reflect a little biton that plan and then also, if you werea chief of staff to the Prime Ministertoday and the economy deteriorates toa more dire scenario, what are the solutions?And is reducing SG one of them?Don Russell: The stimulus underwhat the economists have suggested isreally coming from a windfall increasein wages to people. at the same timeIt’s temporary. At the same time you’retelling them this is probably the worstfinancial situation we’ve ever been in, atthe same time you’re telling them we’vebeen overconsuming and we shouldbe saving, so my guess is most of that’sgoing to end up in savings. Whichis where it’s been going from othermeasures.

I would have thought that thechances of stimulus to consumption ispretty marginal.Nicholas Gruen: In which case it’s agreat sly scheme for the industry to getthe rate up to 12 per cent in the future,without much effect on the short term– perfect. No problem at all.Don Russell: This is a really unusualcollapse in that we’re dealing witha quite extraordinary collapse in wealth,a collapse in equities and US housingprices and what have you. We are notgoing to get this back into some sort ofbalance until we put a floor under assetprices, and in reality push those assetprices back up again.

Because that’swhat’s terrifying the pants off people.They’re looking at retirement arrangementswhich they thought were inplace but now, my goodness, people arethinking about working until they getput in a box. So we’ve got a major problemwhich is to do with asset prices.Now one of the things the SG hasdone – and I’ve dug these numbers outbecause Richard Gilbert has got me todo something at the IFSA Conferenceabout increasing the SG – one of thebig, big benefits of the SG has been thatthe equity risk premium in Australiahas actually come down.

Australia’s traditionally run anequity risk premium higher than therest of the world because we’re a capitalimporting country. Normally we’vehad to offer anyone holding equity in

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