The effects are potentially quite widespread. Any company that has been borrowing short and lending long is in exposed here. They’ll have resets coming up on the debt, and as Centro has proved, it’s extremely difficult to get finance for that. To the extent that they can refinance, it’s not unrealistic to say some of them might face a whole percentage point increase. For those companies, earnings will be materially affected.

Investors and superannuants are also likely to be affected. Under the legislation it is supposed to prohibited to gear the superannuation, so in that sense superannuants shouldn’t be directly affected as a result of their gearing. In terms of indirect affect, in terms of investment in those companies, have earning been materially affected? Yes. If stock prices fall, dividends distributions are either cut or decline as well. So both the capital and income growth sides could be affected.

That becomes more serious if it leads to basically to a massive attempt to sell down assets, what some have called a fire sale. Therefore we start to see the real value of assets eroded dramatically. That causes massive negative impacts to wealth effects. And in the worst case of course that detrimentally effects corporate earnings which could see employment cut — the US economy is closer to this scenario. If we see job losses, then you have the problem move back into the real economy. If people lose their jobs and income is cut, people can’t service their mortgages and other consumer debt. The whole situation could become pretty ugly.

But in Australia, we’re a far way away from that because we have such strength in the labour market and on the income side of the economy. We’ve actually identified recently that people have actually been increasing their savings. So we think people could take some shock on the income side without the whole economy keeling over.