With the election now over and the ALP in power with a strong cross bench of independents, Australians have made it very clear that it’s time to move past the short-term, populist pitches to the electorate and time to focus on some of the many structural issues facing Australia. These include, but are not limited to, climate change and the transition to a zero-carbon economy and housing – both affordability and supply. Both are multi-decadal issues which require long-term policy action. They are issues that not only require the parliament but also the public and private sectors to work together on meaningful solutions which includes the investment sector – superannuation funds, fund managers, banks and advisers. All have a role to play in driving forward the positive change Australians want to see.
From government, this requires a commitment to evidence-based policy setting and frameworks that drive investment. We need a whole-of-government approach, across portfolios and departments, rather than the current siloed thinking. As it currently stands, we have disjointed policy settings that create friction and dysfunction. On the one hand we have a net-zero by 2050 target, but when it comes to financial policy, we have a Your Future, Your Super (YFYS) performance test that constrains superannuation funds from making the large long-term capital commitments to climate solutions required to build the momentum towards 2030 and then 2050. We are seeing increasing evidence that the YFYS performance test is shortening the investment horizons of super funds, diluting one of their strategic advantages. As our national savings pool grows, along with government debt, we need integrated solutions for investing in projects that aid nation building, accelerate the climate transition, and improve access to affordable and social housing (whether renting or purchasing).
We also need a whole-of-government approach when it comes to retirement. We have an ageing population, who have far greater aspirations for security in their retirement years than previous generations. Our superannuation system remains primarily focused on accumulation. Meanwhile, the financial advice sector continues to contract. Over the next 12 months 250,000 people will retire and it is difficult to see how they will experience the best retirement outcome that their accumulation savings warrant.
Retirement is more than just spending accumulated savings and integrating this with the age pension. The Retirement Income Review highlights the importance of housing in retirement, yet the trends are for lower home ownership and greater levels of mortgage debt at retirement. A great retirement system would account for housing, health and aged care needs. For government and industry, the challenge is clear: we need cradle-to-grave thinking, with policies, products, and services that interact efficiently across each stage of life.
We also need to address the continued inadequacy of women’s retirement security. It has been talked about for decades, but without active policy settings, that includes things like superannuation on parental leave and government top ups for periods out of the workforce as well as improved access to affordable childcare, women will continue to be left behind. Once again, housing is crucial. We need to get on with it, government needs to act. We need to get this done.
How do we get this long-term thinking? As a starting point, isn’t it time that we stopped superannuation being used as a political football? The endless reviews and tinkering. Isn’t it time we removed the temptation from governments who see superannuation as a shortcut to fixing other problems and can’t resist trying to raid the biscuit tin? Preservation is one of the foundations of a strong national retirement savings system and this needs to be reinforced, not undermined.
Possibly it’s time for a new oversight structure, which is tasked to act independently in the long-term interests of the Australian population – both present and future generations.
Of course, industry has its part to play. Every decision that puts agency ahead of member outcomes reduces the strength of the superannuation system. Industry needs to continue the search for efficiency, improve accountability and deliver an excellent first round of Retirement Income Strategies. Advocates need to be mindful of the balance between working life and post-work outcomes.
All of this requires a change in mindset. There is endless discussion on the economy, which is important. But we don’t live in an economy, we live in a society. The economy is there to drive the needs of the country, not the other way round. It’s time for a new social compact that drives Australia forward. The election result clearly shows that is what the Australian population is calling for.