Transcript of Question & Answer Session Interest Rate Benchmarks

Yeah we'd just like to give a couple of minutes for people who haven't sent their question in yet to send one in. There's one here, but there's a little bit of time left at the end of this session. So if you want to ask Guy anything it's a good opportunity to put your hand up or text in a question.

I'll start with the one that's here. How much, if any, compulsion is the Council of Regulators prepared to put into a benchmark system or setup?

No I think we'll see how we go. I mean, we've put those proposals to people, we'll see if AFMA can come back with something which looks viable. That's always a fall-back position. In the UK, LIBOR submitters are now compelled to put submissions. It's not our first choice but we'll just see how we go.

Any questions from the floor?

Yep.

How long away do you think you are from being able to produce your compounded index?

I mean, we're actually pretty much ready to go, I don't know if it will be tomorrow, but it will be shortly. So I mean, we publish the cash rate every day. I think we're going to talk to AFMA about it this week so you know very, very shortly. I'm not sure literally tomorrow, but sometime in the next week or two I think we should have it up there. As I said it's a fairly straight forward calculation, just compounding the cash rate which we already publish on a daily basis and we're intending to get it up there sooner rather than later.

Okay the questions are starting to come in now, I've got one from over here, and just while I get a microphone over there I'll ask this next one from the audience. On the issue of risk free benchmarks, what is your view on swap spreads falling below bond rates and the potential impact?

I'm not sure there is any rule of finance which says that they have to trade at a premium to bond rate. I mean they're different products so I'm not sure that one has to be always above the other. I mean, swap spreads have been impacted by the cost, a number of increased costs of holding particular products on bank balance sheets. They've been affected by rises in repo rates and the like and the increased costs of doing that. So there just seem to be, there are two things which are different prices and they're affected by different things, so I don't think there's any, as I said, god-given law of finance which says that swaps spreads always have to trade as a premium to bond rates. So I just see them as they're reflecting different dynamics in different markets, now one happens to be below the other, I don't see any particular bad consequences which come from that. It just reflects the difference in market structure today.

In relation to transparency of where bills are trading and ultimately getting a more transparent BBSW, have you thought about an exchange or some type of network where everyone can access, or at least see, where bids and offers are, and it actually shows you the depth of the market based on pricing and volumes? Basically like a futures market, that way it's all very clear.

So that's potentially an option, the electronic trading platform which I was talking about, or platforms using the three of them which are out there at the moment, could very easily put up a structure exactly like what you're talking about. And that may well be what AFMA comes back with. So I think that's very much one of the propositions which would be out there which we would be able to see where the transactions are taking place but potentially also the depth in the market as well at the same time, so yes. I think that certainly should be something which is under consideration.

Did I see there was a question over there or was I imaging that?

I don't know.

I was imagining it. Okay we've got a couple more off-topic ones Guy as always. I'll ask them, how would a Brexit affect global financial markets?

Don't know, something else for financial markets to worry about. I think it's more likely to have an effect on the political aspiration of Cameron and Johnson as much as anything else. But I don't know, so that's yes, that is just another thing for everyone to worry about over the next four months. But I'm sure it will become clearer, hopefully the polls will be a little more accurate than they were before the Scottish referendum.

Okay thanks Guy, and another off-topic should low income households be able to opt out of compulsory super contributions?

No that's way off my topic too so I'm not going to answer that one.

I just ask them. Okay so anything else from the audience? I'm through on what's come in via SMS. Okay well in that case we'd like to say a thank you, as always, to Guy Debelle for making himself available to speak at this event I'm sure everyone would like thank him – join me in thanking him.

Thanks very much Lance.