Speech Interview with Reuters

I just want to, get started by asking you about the, you know, the Westpac consumer sentiment data yesterday. And then the NAB survey. So they both came in pretty strong. And I think the consumer sentiment, that turned optimistic for the very first time in nearly four years, what’s your read on those?

So look on the Westpac survey, there’s also an ANZ survey, weekly survey of consumer confidence. If you plot the two together, I don’t know if you’ve done that, that’s an interesting picture, it’s worth doing. You’ll see that they have diverged for some time. The ANZ survey is materially weaker – it has improved but it’s materially weaker in level terms than the Westpac survey. So as you say Westpac has picked up above zero for the first time, I think your first thought when you look at that comparison is that these numbers might be a little volatile.

And indeed Westpac themselves, if you see their statement I think uses words like surprised or, some intriguing, you know, I can’t remember the exact words, but the some intriguing results here, which I think suggests that they themselves are uncertain how much weight to put on them. If you look at, some of the measures within this survey that we put most weight on, things like people’s personal financial position, which seem to have better correlations with consumption they aren’t quite as strong.

And some very similar questions in the Westpac survey and in the ANZ survey, things like, you know, is this is a good time to make a major purchase, have different answers. So I think your first thought when you look at that chart is that maybe it’s a little volatile and we should aim off it a little bit.

It’s an interesting question you could ask well what if it’s true? What if, in fact, consumers have become substantially more positive about things, the determinants of consumption, real incomes and wealth, are stronger now than they have been for some time. They’ve obviously been, you know, pretty depressed, particularly on the real income side. So, you know, we’ve been treating the weakness of consumer confidence as a bit of a puzzle.

At some point, I think everyone had been expecting that it would improve somewhat. So maybe directionally it is telling us something. But I think our starting point on that survey will be probably had a bit of an erratic reading, and we certainly want to spend a bit longer thinking about whether it persisted and whether the ANZ measure started picking up before we gave it too much weight.

On the NAB survey, we saw conditions pick up a little bit and also the high capacity utilisation rate.

The pick up of business conditions wasn’t spectacular, right. It was positive. But, I mean, many of those measures were sort of at or around period averages rather than being spectacularly strong, spectacularly weak. As you say, the capacity utilisation thing is important.

You will see the speech I did a couple of days ago where I tried to show, and in fact, I used the NAB survey data, the old data not the most current one. But it’s consistent with that picture, that we are and had begun this recovery at the end of last year with a pretty high, an unusually, historically high level of capacity utilisation in the economy. Our models suggest that, but the models are subject to error.

But the NAB survey and this is another measure consistent with that, also show the same picture, which is that, you know, as I say, as GDP growth has been recovering, the level of capacity utilisation in the economy is at a historic high. That’s a good thing, from an economic management perspective, because you don’t want spare resources sitting around. That’s people’s jobs, it’s livelihoods, it’s factories, it’s businesses operating below capacity. Margins of spare capacity are not in and of themselves good things, but it does create some challenges and an interesting context for monetary policy. So I think, the NAB survey, unlike the Westpac survey, was I think confirming a picture that we’ve known about for some time rather than giving us dramatic new news.

I just, want to get a little bit deeper into how do you interpret the behaviours of Australian consumers. Because based on the monthly household consumption data that we had, it seems like Q3 was pretty soft and that’s going to add very little to GDP growth in the quarter. But at the same time, you know, we had housing prices adding to wealth effects, and that consumer sentiment was pretty strong as well. Like how do you how do you make sense of that?

Well, look, I mean, like all data that they, they’re moving in different directions at different times. Australian consumers have been under pressure. Obviously, like globally, it’s true here as well real incomes through the period of heightened inflation were under pressure, a lot of pressure. Households spent time rebuilding their balance sheets, reducing their leverage. Even now, when you look at the data of household savings in their offset accounts and their other means, it is high, and they are clearly taking advantage of higher interest rates, but also the uncertainty that they perceived about the outlook for the economy to rebuild their positions.

And that has obviously had, a dragging effect on consumption growth. Consumption has picked up, but it’s picked up in a pretty modest and gradual way. For some time, not recently, but for some time, we and other forecasters were expecting consumption to pick up a bit more strongly and we didn’t see it. More recently, it has picked up closer to levels that our models have expected.

But even so, I was just looking at our forecasts here. Our outlook for consumption growth over the forecast period is in the low twos, which by long-term historic standards is relatively modest. And that’s part of this broader story of the recovery to around 2 per cent growth, which we are roughly at already in terms of GDP, is probably as good as it gets for this cycle. We’ve downgraded our assumption of supply capacity in the economy to around 2 per cent a year. A broadly speaking, GDP growth is already at that level. So when we think about consumption growth sort of surging forwards, at very much higher rates, that’s not our central case. You say the latest number was soft. The household consumption number wasn’t actually that surprising to our teams here. You know, you have some ups, you have some downs.

The other question I have is, how come you are so confident on the labour market? Is the labour market this slow in other countries as well? Is there a number in your head for the unemployment rate that would make you go, oh, that’s a bit concerning?

Well, firstly, I reject your premise that we’re confident about the labour market. It’s not wise for central bankers to be confident, certainly not overconfident about anything. So we’ve never, I think, made statements about the labour market that we’re confident in the outlook or we’re confident about where we are today. I was interested that you said that employment growth was slower than other countries. There’s a chart in the speech that I gave, which I do quite like to point people towards which shows the level of employment to population in Australia. We’ve all recovered after Covid. But Australia has stayed high and level. New Zealand, Canada, the UK, the US have all come off those peaks. So I don’t see that as in any way a weak employment picture compared to other countries. It’s a very strong picture relative to other countries.

I meant slowed in other countries.

Oh, I’m sorry, I misunderstood you, it has slowed in other countries. Employment growth here has slowed too, but it remains positive and we had expected there to be some slowing because of the changing composition of jobs. So you’ve had, a large proportion of employment growth in the last couple of years has taken place in the non-market sector, which has lower measure productivity rates, market sector somewhat higher. So as you shift, as we need to, from public to private demand and we’re seeing that, you would expect a compositional effect on employment growth, which would somewhat slow. But it remains positive and our projection for employment growth over the forecast period of 1 to 1.5 per cent is still pretty decent by long run standards. And it’s against that backdrop of a high level of employment growth. You ask if is there a level of unemployment that will cause us to worry? No level of unemployment is good news for anyone. Not having a job is one of the big challenges to anyone’s life. Certainly, there are no levels of unemployment that make us happy. So, our forecast for unemployment is for it to roughly remain where it is now. Maybe that’s what you mean by, confident.

Obviously, there are big margins of error around that central case. But if you look at, actually, we were just reviewing it this morning. We did a survey of external forecasters, what they think for employment, they all have actually surprisingly similar profiles. There’s a range of uncertainty around them, but no one is saying we think unemployment is going to 10 per cent or going back to three, two and a half or whatever. We’re all within a fairly narrow range. Could that forecast be wrong? Absolutely. And, you know, as we often say, the one thing you know for sure about a point forecast is that it is 100 per cent certain to be wrong, you just don’t know in which direction. This picture of a recovery in the economy in growth terms, this picture of inflation stabilising at or around the midpoint would also, if right, be a picture of the labour market stabilising close to equilibrium levels. So that that’s our big picture story of the economy. Whether it turns out to be right or not, only time will tell.

And then the other question is, the RBA did say that you’re close to achieving both of the policy mandates in September. I think Sarah said that. Do you still believe that? And are we still on this narrow path?

Well, I think Michele actually may have even officially retired the narrow path analogy back in the earlier part of the year. That was a story particularly about the challenges of bringing inflation down. And if you remember, and I think it was a phrase that maybe the previous governor first used that was really about saying, gosh, we’ve got to get inflation down a long way, from sevens and eights to two and a half. The history suggests that doing that does drive quite a substantial slowdown in employment growth. A significant achievement of that disinflation has actually been that we didn’t see anything like that substantial slowdown in labour market that people maybe expected. That’s what he meant by narrow path, I think, is how do we get inflation down without driving unemployment up to a substantial, to an excessive degree? I think we’ve probably moved on from that. I don’t know the precise quote that you’re referring to from Sarah Hunter. I would be surprised if she declared success. It’s not normally in the DNA of central bankers to declare success. What I suspect she was pointing out is, relative to expectations let’s say a year ago, I talked about this in the speech as well, a lot of people thought that when other central banks were cutting rates in the second half of last year, that we were behind the curve. Perhaps you even wrote it yourself, I don’t know. And there was certainly a few in the market that said, look, these other guys are cutting rates. Why are you not doing so?

The answer to that is we didn’t raise interest rates as far, so we didn’t feel the imperative to cut them as far either because our rates were lower than elsewhere. We also needed to see stronger evidence that inflation was going to come down consistently and persistently, sustainably to the midpoint of the target. And we needed more evidence for that. We also expected growth to pick up, not because of the impact of easier monetary policy, but because of the Stage 3 tax cuts and some of these other drivers that you saw from GDP. So none of those made us think through the back half of ‘24 that we needed to join a rush to cutting rates prematurely. We didn’t have rates as high. We saw GDP recovering and we still worried a little bit about inflation. Relative to that picture a year ago, maybe this was the point that Sarah was making, a number of the goals that we set ourselves have come about. GDP has recovered, inflation has returned to the target band, albeit it’s now the upper end of it, and employment growth has stayed relatively strong. So those are, by macroeconomic standards quite encouraging outcomes. And I’m sure she would have said that.

On the other hand, monetary policy always looks forward. So there isn’t really ever a moment, sadly, to sort of declare success and say mission accomplished. That’s a very dangerous thing to do. You’re always thinking about what’s the next challenge, what’s the next outlook? And obviously with the latest inflation data and to some extent with the pickup in unemployment as well, we’re already thinking, what does this mean for policy?

The other question I have is what gives you confidence disinflation is still happening in the economy, especially given the economy is still pretty strong and the labour market is strong? How can you be sure disinflation is still underway?

Well, obviously inflation has picked up a little bit in the latest numbers. So, you know, that obviously is a very live question. If I slightly reinterpret your question as do we think the stance of policy is still mildly restrictive? We do. That is our central estimate. And the reason for that is that, as I say, growth is still picking up. When you look at household credit, it has picked up in growth terms, but if you express it as a share of income, it’s actually fallen substantially over the last couple of years and is not historically strong. As I said a moment ago, you still see consumers building up savings, choosing to take historically relatively large share of their income, and investing and saving it rather than spending it. And you know, unless you believe the latest Westpac numbers, people still say they’re uncertain about the future, they’re worried about their job prospects, they’re not feeling in a place where they want to make large scale purchases.

So for all those reasons, I think our best guess is that policy is still marginally restrictive. But as we said in our latest statement, that judgment is an increasingly important part of the policy challenge. And there are people out there, and I rehearsed a set of views in the speech that you could take who are arguing, well, certainly financial conditions in a broader sense suggest our interest rates have eased. And there are people who argue they’re already accommodative. I think to believe that view, in other words, that our stance is not currently restrictive, you have to take a number of edge case assumptions. So you have to assume that the neutral interest rate is a number with a four in front of it, for example. You could believe that if for example, you take the US long rate, you say we’re a small open economy, we’re largely a price taker in international capital markets. So maybe the neutral rate is around a four number. It which case it was slightly below that. If you put particular weight on the equity risk premium, the compressed credit spreads, all the stuff you guys talk about a lot in terms of broader global capital markets. If you look at the pickup in business growth, those are all factors that you could use to cite, well maybe financial conditions broadly defined are on the easy side of neutral now. But as I say, those ignore the fact that Australia is still largely in fact a largely bank-based economy and that household borrowing relative to their incomes is still by historical standards relatively low.

But those are more active debates now than they were a few months ago. The committee is debating them and it’s really important, right? I mean, if it turns out that in fact the judgment is that we are no longer mildly restrictive, that has important implications for our future policy stance.

The next one we have is about the makeup of the Monetary Policy Board. Right now the majority of the people on the board are external members. So do you think that’s unusual among global central banks? And is there a risk that the RBA will be outvoted by the external members and that you have to defend the decision that it doesn’t agree with?

It’s a somewhat unusual setup, yes. But what I would say is, and I would not recommend anyone spending ages doing this sort of dry comparison of the composition of policy boards across the world. The nature of policy board structures depends heavily on the economy and the society within which they’re vested. So obviously I come from the UK where the Monetary Policy Committee consists of mostly economists. They are independent voices. They’ve just made some changes to the way they communicate. So each member gets their own named paragraph as to how they’re seeing the outlook for the economy. That is a sort of edge case solution in terms of individual accountability. Other boards, you know, I could mention the ECB, I could mention the Fed, I could mention the BOJ, I could mention RBNZ, have different structures. And my view of that is that they reflect what society wants to see for the legitimacy of the way that policy is set. And one of my reflections, and I obviously been on this board now for about a year and a half, is that the board in Australia functions very well, I think, on behalf of Australians.

So you have a wide range of backgrounds and skills and knowledge. You have centuries of judgment and ability and experience on boards or like in Ross on the Fair Work Commission, or like Harper in academia. I could go on. They bring a very wide range of real-world views to bear on the policy. My sense is that that’s important for the legitimacy of the monetary policy framework in Australia. If you put policy exclusively in the hands of ivory towers economists, I think Australians might well say, who are they to set policy? What do they know of my life? What do they know of the economy? You can debate endlessly whether structures are good or bad and optimal or not. I think the structure is well suited to success in Australia. You asked about what are the hypothetical voting structures? We now publish voting records. I think that’s a good thing. They’re not named and they won’t be named. And I think that’s also a good thing. And I’ll say why. Because it’s really important that we protect the space, that we maximise the incentive for genuine debate or about alternative views about where the economy is going. Throughout this conversation we’ve talked about uncertainty to do with the outlook for unemployment, uncertainty about the outlook for consumption, uncertainty about the stance of monetary policy. Reasonable people can and should differ on those views.

One of the things that the RBA sometimes been criticised for, I think unfairly, but it has been criticised for, is this idea of groupthink – that everyone thinks the same way. There’s no danger of that with this board. It’s a fantastically diverse group of ideas and thoughts and I think Australia is best served by ensuring that that debate is as robust and vigorous around that board table as possible. I can assure you that it is. And our job in terms of communication, I think, is to get those different views about the economy, firstly into the policy decision and secondly, to communicate them through the press conference and the minutes and all the rest of it. Attaching names to those views, I would humbly suggest, is pretty irrelevant, actually. Who thought what is much less important than what did they think? And if you had a structure that reduced the ability of those arguments to be free, why did you argue that? Aren’t you beholden to this community or that community? I think you’d have a less effective debate rather than the more effective debate. So there are any number of different outcomes that you could imagine on the board over time. You said, will the RBA be outvoted? The RBA is the Board. The Board is the statutory body responsible for setting monetary policy. The RBA staff and the executive and Michele and myself are important members of that board. But we are, when we are at that table debating a single goal, which is how to set interest rates on behalf of the economy.

We’re very strongly committed to increasing and broadening the diverse range of views that go into that debate. I think on net, it’s not a good outcome for it to become personalised or for people to think, I can’t make that argument around the board for fear that someone might say, how dare you say that in the public domain. It’s a robust and vigorous debate and any number of possible outcomes are possible around that table. But what you should care about, and I think what people do care about, is whether the right decision is made, not who decided what.

Just a quick follow up question about what’s causing the delay in having the board members give public speeches?

Well, so the commitment in the Statement on the Conduct of Monetary Policy is that each external member, obviously Michele and I do a lot of engagement, is a minimum of one public engagement a year. The definition of engagement is broader than just speeches. It’s about the board getting out and about explaining their views, the board’s views, but also listening and also engaging with the community. And actually some of those things have already begun to take place. Sometimes they’re big splashy events, sometimes they’re quiet but careful listening to business and public organisations around the country about what they’re hearing. And those are very valuable. You will see more of those things over time. And that’s a commitment that the whole board needs to follow through on. But some of them will be high profile and some of them will be careful and thoughtful listening to communities, things I think are really important. One of the things I personally have spent a lot of my time on since being here is exploiting our fantastic liaison operation that we run right around the country to go and listen to businesses, to social groups, to local public organisations about local conditions. How are they seeing the economy face up? I strongly recommend it. In the UK, it used to be the case of all monetary policy members had to get around and about or they’d be held up in front of Parliament as not doing their job. As someone who obviously still has things to learn about Australia, I have benefited strongly from that. I think all policymakers can benefit from getting out and about.

The important thing is, are we getting the message across about how we are setting policy? I counted the number of communications tools in the Statement on the Conduct of Monetary Policy, I counted 14 separate ways. The press conference, the statement, the statement on monetary policy, the bulletin, the parliamentary accountability, the minutes. It just goes on and on and on. People aren’t going to spend 100 per cent of their time learning about every aspect of monetary policy. Our goal is to get our message out clearly and succinctly. We have loads of tools for doing that. The public engagement of board members will be one more. But there’s a lot of communication and if you go back 10 or 20 years and you look at what central bankers used to say, there was one famous comment from a central banker overseas that they were proud of the fact they’d never spoken to a journalist on the record for the whole time of their time in office. That may well have been right for the time, but it’s impossible now. If you think that the RBA isn’t open and clear yet enough about its policy thinking, I mean, let us know. But I hope that we are becoming increasingly so. I’m certainly very committed to that.

The other question I have is that you’ve been in Australia for almost two years. I think you have rightly pointed out the false prophets, the media attention on the RBA. I’m just wondering, do you have any views on Australia’s obsession about housing?

Well, I come from the UK and I would say to you that any obsession with housing is not unique to Australia. There’s a sort of, you know, tedious moment at any party or whatever where people start comparing house prices in the UK. So it’s not unique to Australia.

Do you think that has anything to do with how productivity is quite slow here? Do you think the obsession about housing helps explain why we have this productivity issue?

I don’t think so. What would the link there be?

Because a lot of the economy is tied up in housing, mining.

So look, the productivity challenge that Australia clearly has is not unique to Australia. Unless you come from the US, you have a productivity problem. I come from the UK. Productivity growth there is extremely weak. You look at Germany, you look at many parts of emerging Asia, quite worryingly as well, given that they are engines of our future growth. We are all facing into this challenge of how do we drive higher productivity growth in the economy? That’s first and foremost a responsibility of the private sector, by the way. I think sometimes that gets underweighted a little bit. It’s not a social responsibility. But clearly the way to profits, the way to growth, the way to success as a company is investment and innovation. And those are things that all Australian companies are focused on every day as to how to drive through. Is it a technology issue? Is it a skills issue? Is it a question of providing infrastructure? These debates are being had in Australia through the Productivity Roundtable and the Productivity Commission and everything. And I actually think it’s a fantastically vibrant debate that’s going on about that, I think it’s a good thing. We haven’t cracked it yet.

But I think, is our gaze distracted from driving the next wave of growth from Australia by our obsession with housing? I don’t think so. I don’t think that’s the primary issue. As we all know, ensuring we do have a sufficiently strong housing stock to house the people that will drive that future of productivity, obviously that, from a narrow economic perspective, is important. So do we have enough houses? Do we have houses in the right places? Do they have the right provision of utilities? Those are a key element of a successful growth model for Australia, just as they are everywhere else. So housing is not irrelevant to that question, but the fact that people spend too much time worrying about their houses and not enough time about innovation. No, I don’t think so.

I want to shift gears and talk about overseas. Do you see an AI bubble?

I don’t know, is my honest truth. AI is real. Do you use AI a lot as a journalist? Do you find it useful?

I do.

Does it help you do things that used to take you a long time really quickly?

It helps me write.

So it’s alongside you, right, rather than on top of you. And that’s the model that ultimately, I think it’s going to be. You get some deep questions about what effect will it have on the world of work and people’s livelihood and so forth. I think AI is an enabler, or let’s say that what it will become. It is a phenomenon, right? Globally and I mean, particularly if you’re in the US and parts of Asia, it’s the number one topic of conversation. So I would say like most growth spurts, innovation spurts, what you’re likely to see is real capital creation and probably some false starts and probably some dead ends. And actually that’s what innovation looks like, right? You try this way, you try that way. This thing is a game changer. This thing was a waste of effort. But unless you throw a thousand flowers bloom or whatever phrase you might want to do, unless you throw a whole load of effort, smarts and resources at that problem, you’re not going to work out which of those technologies is the right way forward. Right now, nobody knows that answer. And so anything with the word AI on it is getting a following wind. In due course, some of those bets will turn out to be enormously profitable, for real. And some of them may turn out to be busted flush. We don’t know which of those they’re going to be. But I think the idea that AI is, and you’re not saying this, but anyone who were to say, well, AI is just a complete bubble. It’s pure puff, the tulips, right? The classic tulip thing Nobody makes tulips that are not actually a productive asset. It’s because everyone thought they were sort of thing. I don’t think that’s the right analogy to suggest it, but for AI, there’s real capital creation, real wealth creation in here. We just don’t know for absolutely sure which bit is which at the moment.

Are you concerned of a market correction?

So, I mean, obviously AI is only one part of the stock exchange, both here and in the US but it has created a sense of confidence, particularly in the US around the economic and financial outlook that has lifted all ships, or many ships, not all of them, but many. The equity risk premium is at historic lows. That’s perhaps a bit surprising against the backdrop of such heightened uncertainty. On a policy perspective and geopolitics you think, has equity risk really never been lower? You could say the same about credit spreads. Is there really such a little credit risk in the economy, globally? You probably think that some of those things look slightly stretched but is an imminent market crash in my central case? No. We need to be alert to the fact that some of these financial measures are at historic extremes and that might be telling us something about the outlook or it might be telling us we are genuinely in the middle of a new paradigm. That’s the fun thing about economics, about policymaking is we need to allow for the possibility of both. So, yeah, I’m paid to worry. So am I worried about what a financial crash would look like if it happened? Yes, and we have to be ready for that possibility. I come from the UK where for about 10 years of my life it seemed like we were moving from one financial crisis to the next.

So I know what a financial crisis looks like and the job of central banks is to be ready if those things happen. And the same is true in Australia as it is everywhere. That’s why we do a lot of work on financial stability. But it’s not my central case.

In terms of Australia’s super funds, it’s 4.2 trillion dollars, still growing, increasingly invested overseas. It has its issues, some say governance is not too great either. What are your biggest worries about the sector?

Well, look, super funds are an enormous asset for Australia. It was a far-sighted decision in my view, and this is outside my wheelhouse but I would say it anyway, by the Australian government, Australian society to make this move some time ago. You can see the consequences of not providing for retirement in some countries and it was a far-sighted decision to set that up. And obviously it’s a phenomenon. It’s largely to say fourth largest pension system in the world today, soon to become the second. What worries me about the super fund sector? Well, I mean it’s not our job to regulate the super funds and there are many successes actually in terms of that it’s sensible that they’re sending a large proportion of their resources overseas. They’re doing that in order to deliver the services that they’re required to deliver to their members, which is diversified risk. The fact is that the super fund sector is now substantially bigger than the set of onshore listed assets. So you can’t just keep buying everything in Australia. I’ve talked in a recent speech, maybe this is what you’re referring to, about some of the risk management consequences of those overseas holdings. So particularly the importance of understanding what liquidity shocks might look like if they happen. You asked a minute ago about what would happen if markets corrected. You need scenario plans for that. You need to understand what you would do with your portfolio. And there is, particularly in my view, a rather arcane issue but particularly important issue around FX hedging of overseas holdings.

You need to do that to some extent if you’re bringing all your assets back into Australian dollars. One of the interesting, and you know, it’s almost like free goods being in Australia is that you have a natural hedge in the way that the Aussie dollar works. It tends to be very well correlated with overseas equity returns. That means that you don’t actually need to fully hedge your position in overseas equities, let’s say US equities. In fact, the hedge ratio is only around 20, 25 per cent for equities, it’s higher for fixed income. That’s obviously reliant on those correlations remaining true. And I think as I spoke about a month or two ago, there was an interesting debate earlier this year as to whether the role of the dollar, the US dollar might change in the global financial system. That maybe super funds would change their hedging behaviour quite radically. None of those worries have yet come to pass. The Aussie dollar remains as effective a natural hedge today as it did a year ago. It’s stunning actually. Much more so than other currencies have been quite substantial shifts in the yen and the euro and other currencies in terms of their correlation characteristics. But not for the Aussie dollar. Maybe that’s a testament to some of the strengths of the economy that we’ve talked about here. But that possibility still is there. And do you have scenario plans in place for what happens if that does? You need to change the shape of your FX hedge book.

The best of the super funds definitely do have those plans, but it’s a big sector and they need to make sure they all have those. The other thing I talked about in that speech was the fact that there are some big structural things going on with the super funds regardless of the role of the dollar. They’re getting bigger, as you say, they’re investing more and more overseas. They will in due course move from being accumulating to decumulating as Australian members get older and they start to retire and draw on those pensions. The shape of the portfolio will have to change over that time. That’s all going to mean a larger and more complex FX hedge book for the super funds over time. The super funds need to be thoughtful and are thoughtful about how that FX hedge book would be managed. They’re going to need to diversify. Their counterparties can’t rely on one bank. No one does rely on one bank, but you need to probably rely on several. They’ll need to think about their collateralisation and risk mitigation strategies, which are unusual in some cases relative to some other institutional investors, in terms of giving collateral, in terms of paying margin, in terms of thinking in a more joined up and holistic way about how they manage those books from a liquidity management perspective.

As I say, and I don’t know how much you get around the super fund sector, the biggest super funds are very thoughtful on this. They’re investing quite heavily in making their approaches more sophisticated. And much of what I’m saying, frankly is just playing back to you what I’ve learned from the best and the smartest in that industry about it. Global financial crashes of the kind you describe and the kind I hope don’t happen, would obviously be challenging for the super fund sector given the size of their investments. And as they get bigger and more sophisticated, they’re also going to need to become more agile at navigating those shocks because they will happen at some point.

Thank you so much, Andrew.

Thank you.