Australia increasing investment into the United States by almost US$1 trillion (AU$1.54t) via the superannuation sector has sparked claims the nation is “going back to the past”, as a vow by Labor raises eyebrows.
Prime Minister Anthony Albanese and US President Donald Trump on Tuesday revealed a $13b rare earth minerals deal.
A White House fact sheet about the agreement also mentions Australia’s investment into US defense and says there will be a massive uptick in local superannuation funds investing in America.
“Australia’s superannuation funds will increase investments in the United States to US$1.44 trillion (AU$2.22t) by 2035 — an increase of almost $1 trillion from current levels,” the fact sheet reads.
The investment will “create tens of thousands of new, high-paying jobs for Americans,” the White House added.
Mr Albanese, at a later event at the Australian embassy in Washington, said the nation’s massive superannuation pool was a strong resource and “we want to use it”, according to the Australian Financial Review.
However, the White House’s fact sheet has raised concerns about the government and how super funds make investments.
Chartered Accountants ANZ’s superannuation and financial services leader Tony Negline said superannuation funds should have their customers front of mind.
“(Super funds) have obligations to make sure they invest funds in accordance with the members’ best financial interests,” he told SkyNews.com.au.
“We wouldn’t be in favour of the government directing trustees to invest here, there or anywhere.
“We think it’s the job of the fund – the people that run the funds – to decide where they put the money.”
He noted the government’s former “30/20 rule” for super funds to invest in government bonds and other types of state-owned securities, which was abolished by the Hawke government in 1984.
“There was a requirement to invest a certain amount of money in government bonds and in other types of investments,” Mr Negline said.
“It was seen that was not necessarily creating the right outcomes.
“By introducing requirements to invest in whatever, you are potentially going back to the past of what was unwound for sound policy reasons.”
While the 30/20 rule was mandated for superannuation funds, the additional US$1t of investment into the US has not been so far.
Wilson Asset Management founder Geoff Wilson spoke out against any sort of government directive around how super should be invested.
“How to invest the $4.2t in super should be up to the people that are either managing their self-managed super funds or the professionals,” he told SkyNews.com.au.
“I actually don’t think it’s up to the government to try to influence that.”
Australia’s nest egg is projected to grow from the world’s fourth largest to the world’s second largest by the early 2030s.
It is expected to grow to $7.2t in assets by 2035 as the mandatory 12 per cent employee contribution boosts the nation’s nest egg.
Mr Wilson said Australia would naturally invest about $1t more into the US naturally over the coming decade.
“My reading of the announcement is that it’s just expected normal fund flow as super funds look to invest globally and (with) the US market being the largest global market in the world,” he said.
Shadow treasurer Ted O’Brien warned Labor against using Australia’s multi-trillion-dollar superannuation sector as a “bargaining chip” with the Trump administration.
“How is it you have the Australian government making a commitment on how those savings are spent?” he told Sky News Australia.
After host Peter Stefanovic noted the US market was the largest market where funds can seek the biggest returns, Mr O’Brien acknowledged the potential for returns in the states.
“My point is this, it’s not a plaything of government. It is not for the government to determine how Australian savings are invested,” he said.
“This should not be a bargain chip in a deal. The responsibility is for the superannuation companies themselves to maximise return.
“How is it you have a Prime Minister doing a deal with another country using Australian retirement savings?”
