Federal Treasurer Jim Chalmers has laid down a new agenda for the $3.4 trillion superannuation sector that he hopes will steer part of its vast pool of capital toward nation building investments in housing and clean energy.

Dr Chalmers, claiming victory for Labor in the super wars, told a roundtable of business leaders in Sydney overseeing $3 trillion in investment capital that super played a role “investing in our national priorities” and “addressing some of our most formidable economic challenges”.

Anthony Pratt, Treasurer Jim Chalmers and Paul Keating.  Jeremy Piper

“We see trillions of dollars in workers’ capital, we see government budgets heaving with debt, and there are obvious needs for investment, particularly in areas like housing and energy,” Dr Chalmers told the annual Superannuation Lending Roundtable hosted by The Australian Financial Review and packaging multinational Visy. “We are up for reform and new ideas here.”

The government wants its Jobs and Skills Summit next week in Canberra to consider how superannuation funds and banks might respond to a “dire shortage of housing” to support labour force mobility.

Ahead of that, Dr Chalmers, seated alongside former prime minister Paul Keating, addressed the high-powered group, which included ANZ Bank CEO Shayne Elliott, Commonwealth Bank CEO Matt Comyn, AustralianSuper chair Don Russell and Aware Super CEO Deanne Stewart.

“As we see it, the super wars have largely been won, and now we need to win the peace,” Dr Chalmers said.

Mr Keating took aim at the super funds, warning them not to take their social licence for granted. They should be thinking about how to facilitate access to housing rather than simply chasing returns by investing in offshore companies, he said.

“This is a society that can’t house its own children,” Mr Keating said. “If super funds just think they can go buy tech stocks in America and highways in Italy, they’re going to run into trouble. Without being heavy-handed, there is a requirement of the funds to look at social opportunities.”

Legislating a purpose for super

Mr Keating and Anthony Pratt, executive chairman of Visy, argued that superannuation funds should also be investing more in corporate debt, alongside major banks, to diversify their portfolios and support Australian credit markets.

Dr Chalmers pointed to a lack of spending in the aged care sector and said he would “contemplate what, if any, further role for super there is in that”.

Amid renewed debate about the role of superannuation in the economy, Dr Chalmers said the government is working on a legislated purpose for super. He said this would prevent policies like the previous government’s early withdrawal scheme.

A codified purpose for super will put a focus on whether providing an income in retirement needs trustees to maximise returns, and how much they should diversify into lower-yielding assets.

Returns still front-of-mind

Mr Russell from AustralianSuper said super is benefiting from a “huge wave of money” and it is looking to diversify away from equities. But policyholder expectations – generated by high-growth and dividend-paying equities during the stockmarket boom – means investment returns remain front-of- mind.

“We are very conscious that we have to deliver returns which our members have come to expect, because we have delivered for members returns over the last 10 to 15 years of 8 or 9 per cent, which is extraordinary – and that is what is built in.”

Nevertheless, Dr Chalmers said the government wants to support labour moving around the country and is concerned that high house prices and rents is restricting this.

He said the government is working on social housing policies and other schemes with state treasurers but also wants “to get something more substantial on the table on housing as well” at the upcoming jobs summit.

Mr Keating suggested this could involve developing “build to rent” housing as an asset class.

Treasurer Jim Chalmers; Deanne Stewart, CEO of AwareSuper; and Don Russell, Chair of AustralianSuper, at the Superannuation Lending Roundtable on Monday.  Jeremy Piper

Dr Chalmers pointed to figures showing super investment in infrastructure had grown from 3.7 per cent to 6.6 per cent of portfolios since 2014, while investments in residential housing had grown from 7.4 per cent to 8.5 per cent over the same period. “Infrastructure investment is not matched by what we would love to see in residential housing, and the obvious question that raises for all of us is how do we turn that around,” he said.

The treasurer said after the jobs summit, he would convene a “treasurer’s investment roundtable” modelled on gatherings hosted by former prime minister Bob Hawke and Mr Keating in the late 1980s and early ’90s, to “put a structure around trying to solve some of these difficult challenges in the economy”.

The gathering would include super investors, banks and venture capital funds to nut-out policy on housing, energy and social impact investing, while also “working out the best place for the government’s own co-investment funds”, including in green power, advanced manufacturing and supply chains.

The treasurer’s investment roundtable would be a “genuine attempt to treat super as a potential space for common ground and not just another political battlefield”, Dr Chalmers said.

It would “seek ideas, not ideology” to solve the nation’s biggest economic challenges, and avoid “needless brawls over super”.

“We have no absolutely no interest or inclination into being goaded into unnecessary ideological fights about superannuation – there has been too much of that over the last decade,” he said.

Super fund leaders said one of the major challenges of shifting the sector into the funding of longer-term debt, and potentially other asset classes, is a lack of liquidity and relatively lower returns compared to what has been on offer from listed equities.

Source – https://www.afr.com/companies/financial-services/superannuation-will-fund-nation-building-chalmers-20220822-p5bbty