Home' Future Building Australian Infrastructure Review : December 2010 Contents investment, there will be more investment by the superannuation
In a recent research paper, we identifed a range of barriers
to investment by super funds, and other managed funds. These
• an almost singular accumulation focus from many super funds;
• a lack of substantial annuity product offerings;
• the proliferation of small, ineffcient superannuation funds
without the necessary scale to invest in large projects;
• a lack of necessary skill within many super funds to assess
and access opportunities in infrastructure; and
• a lack of certainty about the long-term pipeline of investment
As an example, a key consideration for government is how it
can provide incentives or structures that increase the uptake of
annuity based superannuation products and continue to drive the
consolidation of smaller funds.
Annuities better match the appetites of fund benefciaries to
the long-run, stable returns offered by infrastructure investments,
and also deal with portability and liquidity challenges.
A shift toward annuities would be positive for retirees and help
to manage longevity risk, but also match infrastructure and super
in a way Australia has not managed in the past.
The consolidation of smaller funds will help to address the
lack of internal skills, knowledge and investment capacity that
will allow superannuation funds to better assess and leverage
investment opportunities in infrastructure projects.
A much greater certainty around the forward pipeline of
projects will also be important in helping to create the market
conditions that will encourage the retention of skilled internal and
But the most important step is for funds themselves to decide
that they want to be 'in' infrastructure. Harnessing superannuation
will require funds to make a decision, an allocation and an
investment strategy to drive beneft for fund members from
No one is asking superannuation funds to do anything other
than to take a real look at the opportunities available to them.
The low allocation by most Australian funds to infrastructure
shows that there is room for signifcant improvement – and that
change needs to start with the appetites of funds themselves.
Everybody understands that funds must only ever invest on
commercial terms and for commercial returns; superannuation is
not a piggy bank for marginal projects. But the value that could
be driven for Australian superannuants from domestic projects is
well exemplifed by the massive and ongoing interest of foreign
pension funds in Australian projects.
In ten years time, we wouldn't want to be in the same position
and still debating the role superannuation could play.
Reforming Infrastructure Australia
The next area I would like to touch on is the importance of
Infrastructure Australia has been a success. It has changed
the way that Australia's governments consider the planning and
integration of infrastructure networks.
The organisation’s focus on evidence-based decision-making
has lifted the entire debate about infrastructure policy in this
country. As we move toward the end of its frst Budget allocation
next March, it is appropriate to take stock of what Infrastructure
Australia's role is, and what its role should be.
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In ten years time,
we wouldn't want to be
in the same position and
still debating the role
superannuation could play..
Transforming Australia: An address to the National Press Club
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