This year’s top 10 stories included a peek into AustralianSuper’s international equities build out in London, AMP’s move to slash employee benefits, and plenty of hard-hitting analysis of the issues that matter in institutional investment. But the real story is how readers helped shape all of that coverage.
Orbis’ Stuart Place is riding from Melbourne to the Moon and Back to fund a treatment for the “monster of a disease” that his youngest son was born with. The investment industry is rallying behind him.
Wayne Swan rallies super’s true believers
Big super seems to be experiencing an identity crisis. But former federal treasurer Wayne Swan has provided a unifying vision for Australia’s gargantuan pool of retirement savings.
Former federal treasurer Wayne Swan’s speech at ASFA’s 2022 conference comes as super experiences something of an identity crisis. Executives are fretting over how to maintain their culture in far-flung overseas offices; investors that were once underdogs can now take Sydney Airport private; “profit-to-member” has replaced “industry fund”.
The future of super is doubtless bright. That $3.4 trillion pool of capital will continue to grow to enormous proportions, and even if concerns about “massive and passive” are true, Australians will still enjoy a comfortable retirement as a result. But there is a nagging feeling that super could be doing more. Its ascendancy seems to have some of the old guard scratching their heads and wondering what comes next.
Super’s great “unfinished business” is still the decumulation/retirement phase, but a grand and unifying vision for the industry is lacking. Swan used his speech to provide one.
Just as super has acted as a buffer against financial strife by reducing reliance on the age pension and ensuring strong retirement outcomes, he believes it can now act as a buffer for the Australian economy in a more “polarised, uncoordinated and regionalised” world. The influence of the old institutions is waning, and “the Washington consensus is dead.” It will instead fall to nations, investors, and global institutions to rebuild “a consensus based on inclusive growth.”
“There is certainly a need for Australia to diversify our trade relationships, particularly with non-China Asia,” Swan said. “And we need also to reduce reliance on narrow sources of crucial resources and manufactured goods. Relying on just one or two regions for silicon chips and microprocessors has added too much geopolitical and physical risk to the global trade system.”
“We need to find that sweet spot between “just in time” and “just in case.” And we need to drive a revival of Australian manufacturing and value-adding. New industries. New skills. New jobs for our young people. A strong superannuation sector has an obvious role in all this.”
It’s played that buffer role before, in even more demanding circumstances. The GFC saw funds recapitalise the banks and other corporations in a move that would ultimately see them hold equity equal to around 26 per cent of the shares on the ASX. The Covid pandemic saw a repeat. And Swan believes super should now be the weapon of choice against Australia’s looming climate crisis, which has leapt to even greater prominence after the devastating floods of the last few months.
“The global energy transition is moving quickly but still needs to pick up pace if we are to avoid the worst consequences of climate change,” Swan said. “As we know from our own risk assessment work, climate change poses a genuine threat to real assets.”
“On the flip side, Australia has a significant opportunity to be a global clean energy superpower. We have the sun, the wind and the crucial minerals needed to export clean energy to the world. It is vital that we take this opportunity to enliven our industrial base.”
That, of course, means providing stability to the system. Swan delivered the usual demand that politicians not “mess with it” but also issued a warning on the rapid consolidation the industry is undergoing. Swan conceded that consolidation will provide some benefit to members in the form of reduced fees, but said that “endless consolidation has its risks.”
“Now that our super funds comprise such a major proportion of our nation’s economy, a little caution is necessary,” Swan said. “The benefits from consolidation must be balanced with those that come from competition, stability and responsiveness to members.”
“We need the right structure of funds that are big enough to operate at an optimal level – large enough to reap the benefits of scale, and numerous enough to maintain competitiveness and our sector’s long tradition of innovation and quality service to members.”
Swan’s speech was intended to be apolitical, with no insights into our current dreary election cycle. The reactions of attendees afterwards suggest that many believe it was perhaps more political than even Stephen Jones’ contribution the following day. It amounted to a full-throated defence of the system; a warning to the LNP to cease their tinkering with it; and a blueprint for its future.
It also invoked its past, through the memory of the recently-passed Tom McDonald, who led the building unions and their members alongside the ACTU to campaign for the creation of what would eventually become Cbus – the fund that Swan now chairs. Were it not for the efforts of people like McDonald, Australia would mirror “other nations with a grab bag mix of occupational based pensions and lethargic voluntary contribution schemes.”
“Tom leaves a $3.4 trillion legacy,” Swan said, with the implication that it was now up to his audience to put it to good use.
Photo: Jeremy Veitch
