Superannuation: Should we be concerned about government intervention?

Should Australians be alarmed about Labor’s plans for Super? Pendal’s RICHARD BRANDWEINER believes not

AN essay by Jim Chalmers backing a “values-based approach” to capitalism last month triggered a flurry of positive and negative reviews.

This week a political battle over the role of Super escalated after Labor’s decision to cap concessions for people with more than $3 million.

Should Australians be worried about their Super?

What does the federal treasurer’s essay infer about his view on superannuation – and how the $150 billion or so annual new flows into the APRA-regulated, multi-trillion-dollar system should be managed?

Is there room for government intervention?

The Chalmers essay can be seen as a government’s reflection of the well-acknowledged excesses of neo-liberalism, says Pendal’s Richard Brandweiner.

Chalmers believes in the free market, Brandweiner says. But he also knows that unchecked neoliberalism creates market failures and distortions, such as worsening inequality.

“Markets ultimately exist to improve well-being and to enable organisations, corporations and governments access to capital to grow, and for others to be able to share their capital to save,” says Brandweiner, who also chairs Impact Investing Australia.

Left completely unchecked, markets can generate negative outcomes. But the treasurer doesn’t want to attack markets, Brandweiner believes.

“Chalmers is arguing to help create the infrastructure that will actually help the market play a role in solving some of the very real social and environmental problems we face.

Collaborate and co-invest

“He is asking: is there a scenario where not-for-profits, market participants and governments can collaborate and co-invest on market based parameters in order to help solve these problems.

“He is pointing to the Clean Energy Finance Corporations as an example where government did not direct capital, but there was a collaboration,” Brandweiner says, adding the public-private partnerships are examples of successful co-investments to support infrastructure needs.

“In PPPs, the government is playing a role directing the investment, but private capital is bidding for that and making a market-based decision on where it wants to allocate capital,” Brandweiner says.

“At the end of the day, the thing that matters in the long term is improved well-being for all.

“Markets are a very powerful tool to ensure an efficient allocation of resources, but they can create failures.

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“So how should we think about squaring this circle?

“How can governments, non-government organisations and markets leverage what they bring to the table most effectively to achieve the mission of improving well-being across the board?” Brandweiner asks.

He doesn’t believe Treasurer Chalmers is intending to direct superannuation funds where to invest.

Nor does he believe there is any desire or expectation for returns to be compromised.

“But he does want to create infrastructure that will support return-driven investment into areas which could lead to better environmental and social outcomes.”

“The way the capital in our super system is deployed will impact the world we retire into, and there’s no way around that.”

Given that, Chalmers policies could be critical for all our futures.

About Richard Brandweiner

Pendal’s Richard Brandweiner has more than 20 years of experience in investment management. He is the chair of Impact Investing Australia.

Pendal offers a range of sustainable and impact investing strategies, including:

Regnan Global Equity Impact Solutions Fund, which invests in mission-driven companies we believe are well placed to solve the world’s biggest problems.

Pendal Sustainable Australian Fixed Interest Fund, a defensive Australian bond fund that delivers market-leading performance with positive environmental and social outcomes.

Regnan Credit Impact Trust, which invests in cash, fixed and floating rate securities where the proceeds create positive environmental and social change. 

For more information on these and other responsible investing strategies, contact our head of responsible investment distribution, Jeremy Dean at jeremy.dean@pendalgroup.com.