Conferences are a strange, alternate reality kind of happening, where the real world sometimes seems to be left at the door.
Today we had the opposition spokesguy on matters superannuation, Chris Pearce MP, telling us, on the one hand, that there were “all sorts” of Budgetary problems emerging, not least of which was the Rudd Government’s policy of plunging the nation into debt – about $200 billion worth – and on the other hand, that part of the Government’s upcoming bond issuance program should include CPI-linked bonds, and these could form the basis for a new generation of retirement income product.
Yeah, fair enough, but don’t CPI-linked bonds effectively increase the cost of funding for the issuer? I’m no economist, or financial modelling guru – and no doubt someone can and will tell me if I’m wrong – but if your interest payments rise each year, instead of staying flat, don’t you end up paying more interest to the bondholder over the term of the bond?
So one the one hand, debt is bad, says Pearce, but on the other hand the Government should be increasing the cost of issuing that debt. Go figure.
And then we had Jeremy Cooper, who gave us an intriguing insight into the state of regulatory affairs in Israel, where he says they’ve brought in a law that says if you’re a financial product issuer, you’re not also allowed to be involved in the distribution of that product – in other words, for example, an institution can’t issue financial products in one silo, and own a financial planning business in another.
Interesting idea, and something that the upcoming Parliamentary inquiry into financial products and services could look into, Cooper suggested.
But has it worked?
“I don’t know,” Cooper said. “I should go back and have a look.”
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