Securing Australia’s super-powered future: Speech to the Committee for Economic Development of Australia
Super Members Council CEO Misha Schubert
Wominjeka.
As we gather today alongside Birrarung Marr – ‘the river of mists’ in the language of the Woi Wurrung and Boon Wurrung – we can hear the voices of the ages in that beautiful phrase.
It speaks to us of the long history of our country, and the mighty Wurundjeri of the Kulin nation, who we honour as we open this event today.
I’m honoured to be joined here today by many distinguished luminaries in Australia’s profit-to-member super sector – Chairs, CEOs and executives of funds, and of course the inaugural Super Members Council Chair Ann Sherry AO. Thank you all for joining us today.
Last October, the Super Members Council was created with a clear-eyed vision.
To advocate for the interests of 11 million Australians with their retirement savings in profit-to-member super funds.
A voice for super fund members that works above and across politics to fulfil its non-partisan purpose.
A voice to safeguard and strengthen good policy for millions of current and future Australian retirees.
And a voice that speaks frankly and fearlessly about current and proposed policy ideas – and how those ideas affect the interests of millions of Australians with super – no matter who proposes them.
Safeguarding super is a compelling cause – and not just because none of us are getting any younger.
For me, that purpose is personal.
Because I can see the difference super is already making to the lives of this generation of retirees – my parents’ generation – especially for people of modest means.
The difference between living on the Age Pension alone – with no room to move in your weekly budget.
Or having a bit of income from super on top of the pension to help pay the bills.
The difference between financial survival – and financial security.
In my grandparents’ era, most people retired on the Age Pension alone.
Now, in a single generation, Australia has built a remarkable system to support millions of people to retire with more dignity, freedom and choice.
And now it’s our responsibility to secure it.
Late last year, when my appointment as SMC’s inaugural CEO was announced, it felt like almost everyone I had ever met got in touch to offer a few words of advice.
Much of it was along these lines: ‘Keep my super strong – and don’t let any politicians stuff it up’.
Got it.
What was clear from a diverse cross-section of our community was this: Australians love super.
They really do.
And they take a dim view of anything that would damage it.
Today, I want to impart three big ideas in this speech.
- Australia’s super system is the envy of the world. It’s a great policy that has stood the test of time.
- We weaken it at our peril – and there is grave risk to Australian retirees if the policy bedrock of super is eroded.
- Australia now faces a host of other acute policy problems – including a housing affordability crisis and big nation building challenges. But diverting super away from its purpose is not the answer to other policy problems – it will just damage a system on which the dignified retirement of every Australian relies.
Today, Australians can expect to live much longer and healthier lives than ever before.
And now we need to fund those longer lives in retirement.
So how do we do that?
That’s what top global investor Larry Fink asked in his must-read 2024 note to investors.
Fink – and much of the world – see Australia’s compulsory super system as the globe’s best answer to that question. Just last week, visiting US financier Michael Milken was also singing super’s praises.
Ambitious and visionary, the Super Guarantee – introduced by Paul Keating in 1992 – was a policy masterstroke.
And the system has grown ever since. In 2021 the Coalition Government introduced a performance test that is helping to keep investment returns up and fees down.
Both major parties of Government have contributed to super’s success.
And both have a duty to safeguard it.
Strong and enduring bipartisanship on the fundamentals of super is essential to ensure millions of Australians can retire with a higher standard of living than relying on the Age Pension alone.
And that’s why we need the Objective of Super legislated swiftly.
To be a ‘guiding light’ to current and future generations of policymakers about the purpose of super.
And so today we renew our call for that legislation to be put and passed when Parliament resumes.
If we rewind more than 30 years, Australians had very little super.
Only 10% of retirees listed it as their main source of income.
Today, nine in 10 workers have super – and Australians have $3.9 trillion saved.
We have the fourth highest savings pool in the world, with the 55th largest population.
But it’s the benefits super delivers to millions of everyday Australians that matters most.
The typical Australian now has about $200,000 in super at retirement.
And today’s 30-year-olds can expect to have $500,000.
In retirement, this money means less stress, more choice and more freedom.
Super also delivers powerful benefits to the public purse.
The latest Intergenerational Report projects that, by 2035, Australia will have the lowest public spending on Age Pension by GDP of all 38 advanced economies in the OECD.
Let’s not rush past that.
In 11 years, Australia will have the lowest public spending on public pensions by GDP.
If Governments tried to deliver the same living standards through an increased Age Pension, the Budget would be a sea of red ink.
Parliamentary Budget Office modelling shows this year – the Budget would be $56 billion worse off – and by 2032, that deficit would grow to $102 billion a year.
Super delivers big budget savings, which means lower taxes for all Australians, including for business.
The super system is designed to grow people’s savings in a way few of us could ever do ourselves.
By pooling our automatic savings into super funds which have the scale and skill to invest.
Under the expert stewardship of some of the best investment minds in the world.
And that capital pool is powering Australian businesses.
How so?
- Super invests in our national and local economy. More than $82 billion is allocated for investment by Australian super funds each year. And, in the next five years, profit-to-member super funds are projected to invest a further $180 billion in Australian businesses and infrastructure.
- Super invests in diversified assets. Before super, very few Australians owned equities – now we’re a nation of Mum and Dad shareholders.
- Super invests in new and growing Australian businesses. Super venture capital is increasingly financing great Aussie start-ups – and helping established companies to grow.
- Super invests in local infrastructure. In the next five years, super funds are tipped to invest another $31 billion in Australian road, rail, sea, air and renewable energy projects; and
- Super invests in Australian jobs. With all these investments, come opportunity and employment.
And when times are tough – super keeps investing.
That’s the beauty of patient capital, Australia’s super funds are focussed on the long-term and can support Australian companies over many decades.
In recent years, there have been calls for super funds to invest in ‘nation building’ – including in aged care, the energy transition, and defence.
And while super funds will invest in areas of national priority if the returns stack up – super funds are not the solution to every other unrelated policy problem.
That’s not super’s role.
It’s got one job.
To build the retirement savings of Australians.
So what are the strong policy foundations that enable super to deliver for Australians?
Universality – its benefits are shared by all Australians, just like that other beloved institution, Medicare.
Compulsion – everyone saves, automatically.
And Preservation – your savings are invested until retirement – so the power of compound returns can grow through the decades of your working life.
The quality of life in retirement for millions of Australians rests on these three policy pillars.
Yet, as this pool of capital has grown, the temptation to try to divert it from its purpose has grown ever more alluring for some policymakers.
In addition to the nation-building push, there’s now a long list of unrelated policy problems that some policymakers say people should raid their retirement savings to fund.
Paying off HECS debts, buying electrical appliances, offsetting housing or just covering everyday living expenses.
But anytime a politician suggests people pull money out of super early, it should ring alarm bells.
The Early Release of Super scheme during COVID is a case in point.
At the start of the pandemic, the safeguards on super being saved for retirement were suspended.
Australians were encouraged to withdraw super to support themselves – before they knew that JobKeeper was on the way.
And now we know what those early withdrawals have cost.
Almost $38 billion was withdrawn, mostly by younger Australians.
That will now cost the Federal Budget twice as much – about $85 billion – mostly in higher aged pension costs.
A 30-year-old who withdrew $20,000 can now expect to retire with around $93,000 less in super.
And that policy decision has meant a generation of younger Australians has lost part of the power of a lifetime of compound returns.
Now Australia finds itself in the grip of an acute housing crisis.
This devastating policy problem has been decades in the making.
And its root cause – and its solution – are one in the same.
Supply. Supply. Supply.
Super funds are helping to fix those supply shortages by building more new homes for Australians to buy.
Because expanding housing supply is the policy answer to enable more Australians to realise the great Australian dream of home ownership.
Not a policy ‘sugar hit’ of telling people to withdraw their super early to contribute to a house deposit in a market with too few houses to buy.
That’s why we’ve consistently implored the Coalition to drop its policy to have first home buyers withdraw up to $50,000 from super.
And why we’ve urged policy alternatives that can get more people into their own home without eroding their super for retirement.
Withdrawing super early for house deposits would simply make Australians poorer in retirement – with less super.
And – as our research released today shows – it would make Australians poorer over their working lives too – leaving them with less disposable income.
It won’t achieve its stated goal of creating more homeowners – and it won’t make houses cheaper.
They’re the clear lessons from New Zealand. It allowed super to be taken out early for housing – and home ownership rates fell – particularly for people in their 30s. House prices also surged – growing at nearly twice the rate of Australia.
In Australia, we estimate the policy would raise the median property price in capital cities by about 9%.
That would mean higher mortgages for everyone who buys a house.
It will also increase rents, because when house prices rise, historically, so do rents.
How would that affect a typical young Australian couple?
Let’s say Jack and Jill earn the typical wage and rent in their 20s before they take out $55,000 of their super early to buy a home at age 32.
And let’s say they buy a home two years earlier than they would have if they didn’t use their super.
Because the best someone could hope for under this policy idea is maybe to buy slightly earlier – but they’d pay more for their house.
And, for others, the price increase would actually delay them buying a house.
Even if Jack and Jill bought their house two years earlier than if they’d left their super intact, our modelling shows they’d still be $165,000 worse off financially over their lifetimes.
That’s because rents, mortgages, stamp duties and rates would all rise due to the inflationary effects of the policy.
And people would lose a mountain of money from their super at retirement.
That would make life harder financially for young Australians and make cost-of-living pressures worse.
And the policy would cost taxpayers about $300 billion by the end of the century as pension costs rise.
Finally, it would lower investment returns for everyone with super.
That’s the other key lesson from New Zealand.
Because more of their super pool needs to be on-call to cover withdrawals for house deposits, the New Zealand system can’t invest as much of their super in long-term, higher-return investment options.
You can see the effect of this starkly in the briefing note we release today – which shows the significantly lower investment returns in New Zealand under such a policy compared to Australia.
We calculate the average 30-year-old Kiwi will have about $130,000 less than the average Aussie by retirement due to those lower returns.
If this policy was introduced in Australia, it would weaken super returns for everyone with super – almost straight away – and retirees would feel it first.
And that’s why we urge a return to bipartisanship on super being preserved for retirement.
Australia’s super system is world-leading – but we must continue to strengthen it.
It must evolve carefully – ensuring the system remains stable, effective and equitable.
Our vision – as the Super Members Council – is that we must close the equity gaps in the system – for women, First Nations people, migrant communities and people whose working lives are cut short.
And you can expect to hear us propose clear and compelling policy proposals that help to advance that goal.
We also want every Australian with super to be strongly supported to plan for their retirement with great advice and information – and for super to be simpler and easier to navigate.
And we’re working with government and parliament to that end.
In my experience – first as a journalist covering complex policy and later as a policy advocate – good public policy is no accident.
It’s the product of methodical design, informed by robust evidence.
And expert policy bodies like the Super Members Council play a crucial role in our democracy to inform, guide and safeguard good policy.
We bridge the partisan divides among policymakers – to help Parliaments land good policy.
Super is a powerful public good that should always be safeguarded above politics.
And all political parties should be steadfastly committed to its fundamental policy foundations that deliver for Australia’s retirees.
Super is Australia’s superpower.
It’s a towering policy achievement – 30 years in the making.
It’s enabled millions of Australians to save for a long, healthy and secure retirement.
It has taken strain off taxpayers.
And it has created a vast capital pool that is powering our economy.
All this – and the system hasn’t yet even reached its full potential.
By 2032 – yes that soon – we’ll start to see workers retiring who have had close to a full working lifespan of super.
Australia is far ahead of the global pack in solving the policy question of how to fund retirement.
And the only way we’ll lose our lead is if we succumb to foolhardy attempts to divert super from its purpose.
So today we urge business leaders to help safeguard the policy settings that ensure the strength and success of Australia’s world-leading super system.
To speak up on the importance of safeguarding Australians’ savings for retirement – to avert risks to retirees’ incomes, fiscal damage, higher taxes, and a weaker capital base for Australia’s economy.
To speak up for the key policy principle of preservation.
We all have a responsibility to nurture Australia’s super system and make it even stronger.
The future for the next generations of young Australians – your kids and mine – depends on it.
Thank you.