As superannuation reforms are assessed by the industry and advocated to the public, the Federal Opposition has been absent from the debate. Until now. In an exclusive roundtable convened by Investment Magazine and supported by Fidelity International, Joe Hockey and Mathias Cormann respond to the Government’s plans for super.
Back in 1992, an Act of Parliament put in place a mechanism that has, over the years, accrued $1.4 trillion in superannuation assets dedicated to funding the retirements of working Australians.
But the core purpose of this asset pool, the fourth largest dedicated to pensions in the world, has spun off additional benefits. It has supported a domestic funds management industry whose skills can, with enough diplomatic effort and the right cross-border business framework, be exported to the lucrative private banking markets of Hong Kong, Singapore and Taiwan. This asset pool, which matches the market capitalisation of the Australian Stock Exchange, was a bastion of support for the domestic economy when the financial crisis struck.
Super fund capital was on sup- ply to recapitalise listed Australian companies, particularly when they sought to strengthen balance sheets by issuing shares at steep discounts in the first quarter of 2009. But it was not the only pillar of support for the domestic economy. The budget surplus, inherited from the previous government under John Howard, enabled then Prime Minister Kevin Rudd to fund a stimulus package to support the retail and construction industries. Rudd also guaranteed all savings accounts of less than $1 million held in Australian banks. The housing market was not flooded by supply, and Australia’s resources trade with China ensured the nation was bound to the strongest engine of economic growth.
The roundtable opened with the case put to Joe Hockey, Shadow Treasurer, that not only did the superannuation savings pool help Australia survive the financial crisis, but also increasing the compulsory rate of contributions to 12 per cent – to which the Opposition has been staunchly opposed – was in the national interest. Not only could it provide Australians with greater retirement incomes, but also it would further underpin the national economy.
From the outset, Hockey was not convinced.
He said the trillion-plus dollars in superannuation, if not gathered by the system, would have been present in other ways to support he economy. “The suggestion that this money would not have existed but for the existence of superannuation is wrong. It’s a pot of money that belongs to Australians and it would have been held in different ways,” Hockey said, adding that the privatisation of companies with national reach, such as the Commonwealth Bank of Australia and Telstra, spurred an increase in direct and indirect equity ownership of companies that was “the great story of the 1990s” for Australians.