Submissions on bias in the real risk free rate (30 March 2007)

On 30 March 2007 Powerlink provided additional information to the Australian Energy Regulator on the estimated inflation forecast used in its draft decision. Powerlink’s submission relates to an apparent observed bias in the indexed Commonwealth bond yields which are used as a proxy for the real risk free rate. Powerlink’s submission and a report by NERA on this issue are attached below.

The AER sought interested parties’ views, particularly on whether this issue can be properly addressed in the time remaining for finalising the decision (May 2007). Submissions from interested parties are attached below.