Is Your Retirement Security at Risk?
Adam Taylor-Campbell wonders if by leveraging your superannuation, the government could actually be gambling with your future.
Rob Hockedy on why tried and tested is sometimes best
Retirement Security vs Nation Building
Does anyone else share my concern that the line between "retirement security" and "nation-building" is becoming dangerously blurred? In my view, the government’s push to leverage superannuation for off-budget spending is a high-stakes gamble with your retirement savings to solve their fiscal constraints.
By shifting the definition of "best financial interests" toward domestic goals, I believe the government is risking the very diversification that protects your balance during global downturns.
1. The Fiscal Motive: "Off-Budget" Nation Building
The government's primary driver is fiscal capacity. By encouraging "private capital" to fund housing and infrastructure, they can deliver major projects without increasing the official national debt.
· The Defence Pivot: The recent announcement to tap super for a $53 billion defence build-up is a prime example. I see this as an attempt to fund sovereign capability through member balances rather than taxpayer revenue.
· Infrastructure Gaps: Treasurer Jim Chalmers has explicitly called for a new era of co-investment, focusing on the $3 trillion energy transition.
2. The Concentration Risk: We Are Already Overweight
The current "home bias" is statistically substantiated.
· Current Reality: Roughly 50% of Australian super assets are domestic, which is massive compared to our 2% share of the global equity market.
· The "Maple 8" Contrast: The CPPIB (Canada Pension Plan) maintains a domestic allocation of roughly 14%, focusing on global diversification. I believe Australia's current 50% domestic weight already creates significant correlation risk. If the Australian economy dips, your job, your home value, and your super all suffer simultaneously.
3. What it isn't: The Legal Protection of Choice
The government recently passed the Superannuation (Objective) Act 2024 to define super’s purpose as "delivering income for a dignified retirement."
· The Conflict: In my view, using super for social goals like housing affordability often conflicts with this Act. If a fund accepts a lower social return to build cheap housing, they are effectively taxing their members to pay for a government policy.
· Member Say: Under current law, you have a say primarily by choosing a fund that prioritises global returns over political projects. However, the ‘Your Future, Your Super’ performance test
is being reviewed, and I fear changes may soon shield domestic nation-building projects from the same rigorous scrutiny as global investments.
4. The CGT and Tax Trap
Revisiting Capital Gains Tax and the Division 296 tax ($3m cap) suggests a move to claw back the "cost" of super concessions. I believe these tax shifts, combined with the push for domestic investment, are designed to keep Australian capital locked within our borders to support local asset prices and government revenue.
My Conclusion: I believe superannuation should remain an investment tool, not a political one. Forcing or "nudging" more than 50% of our retirement wealth into a single, small market like Australia defies the fundamental principles of modern portfolio theory.
What’s your opinion? Contact Adam / ataylor-campbell@jmes.com.au
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