Australia something higher than theworld average.But if you look at what’s happenedto the equity risk premium over thelast twenty, thirty years, we used to bewell above average, but it’s come backdown. All the money that we’ve channelledinto super and into Australianequities has actually worked to lowerthe equity risk premium which hashad an amazing effect on valuations,it’s had an amazing effect on basically the cost of capital, it’s actually enabled a whole stack of things in
Australia to be financed which we haven’t financed before.
But in the last two quarters, it’sactually jumped back up again.Nicholas Gruen: Above the rest ofthe world?Don Russell: Above the rest of the world. In other words the Australian equity market has been punished morethan other markets when you link itback to earnings and what have you.You can understand why it’s happened,it’s to do with people’s concern aboutcommodities, the world growth rateand so on, but one of the things we have got going for us is that in the SG, we have this steady amount of money that’sgoing into the equity market and goinginto assets in
So I think if you turn that off, you know, you get very little consumption,and you run the risk of actually doingsomething quite unpleasant to equityprices in
Australia, which is likely tohave a negative effect overall.Rod Glover: The argument aboutwhether it’s going to work in the shortterm, and whether people are going toconsume or people are going to save,is a bit to one side in the sense that weface that argument with any stimulus measure.
You hand out a cash payment,you give them a tax cut, anything that’stemporary. There’s going to be no doubtwhatsoever that some of it’s going to bespent and some of it’s going to be saved.Pauline Vamos: There’s a potentialreal cost to members in that. If suddenlythere was a market uplift and they’renot putting in as much as they can, theymiss out on that uplift.Rob Goodlad: I’ll still argue withyou in 1998 and in 2001 in the tech wreck, had the government reduced the SG that quite possibly we’d still have afairly sizeable catch up, just from thatperiod.Rod Glover: But we’ve got toremember that we’re talking about the additional 9 per cent that goes in each year, your base in superannuation is alreadythere, and it’s just 6 per cent extrainstead of 9 per cent extra going in, andit’s only that two year window. So youwork out, if you had a 10 per cent difference,you’re only talking about a 1 percent or 2 per cent difference long tem.Garry Weaven: I promise you one thing.