Wayne Swan at the Investment Magazine Chair Forum. Photo: Jack Smith

Cbus, the profit-to-member fund set up in 1984 for workers in the construction and building industry, celebrates its 40th anniversary on July 1 this year. In four decades, it has grown from a standing start to $85 billion of assets and more than 910,000 members, and in many ways continues to embody the founding principles of what was then referred to, and in some quarters derided, as the union fund movement. 

Originally known as the Building Unions Superannuation Scheme (BUSS – which merged with AUST in 1994 to become Cbus), the fund was established during the era of the Prices and Incomes Accords, a series of wages and employment agreements between the then-Labor government and the Australian Council of Trade Unions (ACTU). 

Co-operation between building unions, employers and the ACTU in the midst of a major industrial dispute in the building and construction industry led to the establishment of a fund to which workers initially contributed $9 a week each and which, critically, featured equal employer and union representation at board level. 

During the ensuing 40 years Cbus became a public offer fund but has continued to represent members in the construction and building industries. It has completed a number of other mergers, including with EISS and Media Super, and is currently in the process of internalising its investment team.  

In discussion with Conexus Financial editor-in-chief Aleks Vickovich, current Cbus chair and former federal Treasurer Wayne Swan reflects on not only four decades of Cbus, but also on his own role in establishing a system of retirement saving that is about to hit $4 trillion and is the envy of most other developed countries, and the role of superannuation in Australian society more broadly. 

“It’s nation-changing, and we don’t talk about that nearly enough,” Swan says.  

“The underlying strength and power it gives our economy is world-leading, before we actually get to what it does at an individual level which is, in global terms, breathtaking.” 

This is an edited transcript. 

Swan with Treasurer Jim Chalmers (middle) and former prime minister Paul Keating (right), who designed Australia’s superannuation system. Photo: Swan on LinkedIn

Aleks Vickovich: Let’s start with the big picture, and Cbus specifically. Tell me about your own involvement and personal history with the fund, and the way that you see it being integrated with the birth of the system. 

Wayne Swan: My own personal history wasn’t until I became chair. My personal history with super across the board as a public policy is from the beginning, as an MP from 1993, when I was first elected [and] pretty close insights when I was treasurer for six years. We locked in the 9 to 12 per cent [SG contributions] when I was Treasurer. We did that at a difficult time coming out of the GFC. I got to see in the GFC just how important our superannuation savings pool was to the economy then, and how much more important that was going to be in the future. When I got out of Parliament I could have done a number of different things, but my view was if I could have a substantive role in an industry super fund, that was for me the pinnacle of what I wanted to do. 

AV: Because of that economic role that it provides, that national role? 

WS: Also its location in the system. It’s all the things we need. It brings employers and employees together; it shares [and] redistributes wealth to the country more broadly; all the things that I argued for my political life are very much embodied in super: the things we do together and the things that make us strong; that the key to a strong economy is making sure that resources in the economy are fairly distributed. It just symbolises to me what a modern, prosperous and progressive economy and society looks like. 

AV: Tell me about what you’ve learned since you’ve been chair, more specifically around the history and culture of this particular organisation and the role that plays within the construction industry. 

WS: It demonstrates to me the absolute importance of the equal representation model, of having employers and employees in the same room. That equal representation model is absolutely replicated in Cbus. What it shows me is that that model – which is replicated elsewhere but perhaps not to the pure extent now that it is in Cbus – makes us much closer to the markets; makes us much, much closer to the people as a whole; and it makes us much more member-focused. And of course, the whole brilliance of the model is its profit-to-member model. [It] takes out the actors in the middle who are all taking a chop, if you like, from the profit. It’s a critical connection. It’s both emotional and it’s economic. It means that you are much more answerable to your members. It’s living and breathing proof of why a profit-to-member model delivers more economically and is more socially responsible. 

AV: You talk a lot there about equal representation, but critics of the system will obviously tend to focus on one half of that. Now, decades after the Accords and heading into an election cycle where preservation is again a contentious issue, what is it in your experience of having been in the trenches and now in this role that really fuels this kind of hostility towards the system that’s been built? 

WS: It’s just the traditional hostility in our political system against unions. Our economy has far different economic relationships from many other economies. We’ve got a history of conciliation and arbitration. We already have a history of government frameworks being far more involved in setting the standards of work. Industry super has only been made possible because we have that framework. Other countries would kill for that framework, if they could actually get it. Super was built into that. Having employers and employees and having an arbiter in the middle is as old as the country, it’s as old as [when] the Labor movement started campaigning for a basic set of industrial [standards] and guiding investing and distributing the profit share without someone clipping the ticket on the way through. That’s why other countries just marvel at our system. It’s just about to hit $4 trillion; I think the last time I looked, if super was a country, it’d be the eighth-largest country in the world.

Cbus Super chair Wayne Swan, CEO Kristian Fok (middle) and deputy CEO Marianne Walker (right) at a construction association event last year. Photo: Cbus on LinkedIn

AV: There are some who would say that there’s ticket clippers along the way, though. There’s Wall Street funds that are service providers to the super system. 

WS: We don’t begrudge having to pay for services, but we in-house most of our services and a lot less tickets are clipped. Our fund’s a perfect example of that. We are continuing on our internalisation of the investment function.  

AV: You support that overall strategy? 

WS: Yes, it has been very successful. We are further down the way of internalisation of investment, with less ticket clippers, than most other funds. 

AV: When you go back to the Accords, given we’re framing this discussion by way of the milestone of 40 years, is it where you and other advocates for the system envisaged it going? Does it look more like in the future, a Canadian model where you’re internalising more and really being an asset manager globally? 

WS: I can’t really speak on that, I haven’t been in the fund long enough. There are pressures on funds to look more like the commercial sector and less like us. We’re not giving into that, but we are always alive and awake to doing things better, and what we have found is further internalisation has certainly worked for us. We’ve decided not to go down the international route in terms of opening overseas offices. That’s the pathway we’ve taken; I don’t think there is a one-size-fits-all approach. Good on the other funds, I don’t reflect on them for doing it. I think it’s good that there’s a degree of diversity within the industry fund superstructure. I don’t necessarily think bigger is better, for example. I think there was an over emphasis for a while on amalgamations, which have been somewhat disruptive to the overall sector in some ways. 

AV: Was it the right thing at the time? 

WS: Probably. I wasn’t there when it started. I have seen that amalgamations do bring some difficulties, as well [and] it’s not a one-way street. I think ideally, in the system, we’d want a reasonably significant number of large funds. I don’t think it would be good for the sector if we all just ended up replicating four big banks, I don’t think that’s a good model. There has to be a variety of players, some are smaller, some are bigger, and some are medium-sized. The most important thing is how do you relate to your members, and how does size fit in with what you think is best for your members. And in the case of us, we don’t want to be a generalist fund, we want to be a fund in the construction sector. If you just take Cbus Property and how well we’ve done out of that, that’s a demonstration of where you can specialise and do something particularly different. We see ourselves in building, construction, the power industry, we’ve got the Fourth Estate in there. We just say that’s our broad area. We fit very big into the energy transition – that’s a new thing that’s coming along and we’re very keen on that. The EISS merger facilitated that; and we always knew if we got the media in we’d get good coverage. 

AV: Has that been the experience so far?  

WS: No, not yet. We don’t want to be a big fund for a big fund’s sake. We want to be across all the elements of building, construction, the things that power, transport, build the country, and also look after its culture. 

“We already have a history of government frameworks being far more involved in setting the standards of work. Industry super has only been made possible because we have that framework. Other countries would kill for that framework, if they could actually get it.” – Wayne Swan, Cbus chair

AV: You mentioned the energy transition. We’re seeing at the moment this is playing out – it goes round and round, the press calls it the climate wars – and again we’re looking at reneging on targets, potentially if there was a change in government, and so on. What role do you think super should be playing here in this broader challenge? 

WS: It’s not an environmental challenge, it’s an economic challenge. The fact is we’ve got to rapidly develop renewable energy to replace our aging coal-fired power stations. And it’s up to the government to provide a framework within which we can get a decent return for our members in that process. There’s a huge need, and all the funds are working within a number of frameworks to achieve some national objectives. You can see the role that we are playing, and other funds are playing, in housing; a proposition that we’re involved with IFM there is important. We’ve always been bigger into the housing sector than other funds because of our origin. We’ve been a big lender to community housing providers and so on. We have put a lot in over a long period of time and want to put more into the government’s Housing Accord, and that’s all coming along. We shouldn’t talk about the transition as [only] some sort of environmental issue; it’s a huge economic issue for the country. It’s not just a question of targets, it’s a question of these [coal-fired power] stations are closing at some stage, and they have to be replaced. We’re very much wanting to be involved in that. We’ve been an early partner in Star of the South, for example, and hopefully, when it stacks up in the interests of our members, we’ll be doing more in the energy sector 

AV: You mentioned community housing and clearly this government’s keen to get some help on what is a difficult challenge around affordable housing. How is the Cbus board feeling about that? And again, is this one of those issues where you feel super funds are living up to the original promise by being involved in things that genuinely impact people’s lives? 

WS: The frameworks have to be there. We’ve been involved much earlier than many because we’ve been in building and construction. We’ve got Cbus Property; that’s what Cbus Property does. It’s a very successful developer, and it has recycled profits back to our members from investing in office blocks and higher-end accommodation. The irony of that is we’re making very good money out of that, and recycling it back to the people who worked on the construction sites, and more broadly across the industry. We’ve been of the view for some time, before the current housing shortage, that we had a particular responsibility to invest in community housing in various aspects and have been the leader in doing that. But none of that is enough. The rapid surge of population, combined with a whole series of other factors has brought about a housing shortage and we’ve been enthusiastic participant in the government’s Housing Accord, as have other funds who all think the same as we do on this question – I wouldn’t seek to single us out there. 

AV: You see in Europe, for example, some of the pension funds have, either through the law of the land or through their own volition, explicit impact objectives to aid some of this stuff. And we saw the previous government here arguably make that more difficult with their codified best financial interest duty. Where are you on this one? 

WS: I don’t have any dispute with the best financial interest duty. Our first and foremost responsibility is to get the highest possible returns for our members by investing in a responsible and ethical way. I have absolutely no difficulty with that concept at all and, as you’ll have observed, we are a leader in responsible investing and have won award after award after award across a range of these criteria. I wouldn’t want to see people putting mandates on how we invest, but we stand for and responsible investing, in the best interest of our members. I won’t be signing off on any investments – I repeat, any investments – which are not in the financial interests of our members. 

AV: I’ve been reading some of the speeches you’ve been making recently around this historical moment, and you talk a lot about retirement, understandably. One of the central pillars was always to provide a retirement income and we’re seeing that now in the debate around the objective of super. Has the system lived up to that that? Regulators and others have been saying that it’s maybe been focused too much on accumulation. Do you agree with that premise? Do you think the system’s lived up to its mission on decumulation? 

WS: All that’s happening is the inevitable pivot to the fact that we will have more people who’ve stopped accumulating and retiring – by definition.  

AV: Are we late to come up with a strategy, a plan there? 

WS: We can do more work in that area, but it’s not news to any one of us that are running large funds that more and more people are retiring. We’re still one of the younger funds. But yesterday, when we had the 40 years function there was a guy called Andy in the audience. Andy had about $500,000. He’s one of the early members, 1984 or sometime after that. He’s got about 10 years more in the workforce, so he could be headed for a relatively significant amount of money because it takes off as you go on, and he’s on good money. He’s the sort of person who is a beneficiary. 

L-R: Wayne Swan at the Investment Magazine Chair Forum alongside Colin Tate (Conexus Financial), Kirsten Mander (Legalsuper), and Don Russell (AustralianSuper). Photo: Jack Smith

AV: Do they know what to do with that sort of money? 

WS: I think they do, because they can come and talk to people. That’s a great example of our sort of model. There are rules governing advice, but one of the great examples of our model is these people are walking around in an environment where they’re saying, well, I’ve got this and that they’re investigating. Our coordinators are saying do you know this or do you know that, have you read this or have you read that? Everyone’s now conscious that more and more people across our fund at different levels are going into retirement, that it’s entirely appropriate the regulator will be putting more emphasis on what we’re doing. But most of our members will be part age pension, part self-funded through super. The average balance still for our members is relatively low compared to other funds, because most of our members are intermittent. Many of our members will retire on a full age pension with maximum top-up from their super. It gives them a far better standard of living than their parents, or my parents, would have had just on the age pension. 

AV: You mentioned advice there. The government that you were Treasurer in did a lot of work to clean up that industry, the external financial advice industry, bringing in a suite of reforms banning investment commissions and so on. Now we’re having a national conversation about winding back a little bit of that. That’s my framing, it wouldn’t be the government’s framing, but certainly there is some deregulation measures. Super Members Council (SMC) supports some of that. Where are you? 

WS: There’s room for a recalibration in all that. We are not a vigorous participant in this public debate, because what most of our people need is very basic advice. None of it is complicated. It’s around eligibility for the age pension, the intersection of the pension and their relatively modest income from their [super]. 

AV: Arguably they can’t get that advice at the moment, depending on different funds. 

WS: They can get bits of it, and parts of the regulatory process inhibit that to some extent. First of all, we should be able to talk to couples. There are some basic things that need recalibrating there and I think that’s a sensible discussion. 

AV: When you look back at the Accords, and then you think now that super is heading to $4 trillion, and it will continue from there, does it broadly look like what you set out to achieve? And did you envisage that it would always be this contentious? 

WS: I did. But the people who did it, they thought big, and they spread the gains broadly. And that’s precisely what it does. 

AV: And what would you say heading into this election? The coalition is taking a policy around this housing piece, specifically, they’re having a crack at preservation, effectively. What would you say to voters who are tempted by that, eager to get on the property ladder? It seems like a primal motivation, but what would you say to them about what they’re giving up or what would you say about the broader debate there? 

WS: When you dispense with preservation, you destabilise the system, and you threaten its future. When you threaten preservation, you put in danger a key platform of our economic strength and you threaten the retirement savings of millions. 

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