3 November 2021
JIM CHALMERS MP SHADOW TREASURER MEMBER FOR RANKIN
ADDRESS TO THE ACTU VIRTUAL SUPER TRUSTEES FORUM
It’s always a pleasure to be invited to address this Trustees Forum, something I’ve done most years now I think since about 2015. I’m grateful for that and for the opportunity to work closely with you, and for your work with Stephen Jones and our economic team.
Today I want to talk about climate change. But this gathering being so close to the election also gives us a good opportunity to first take stock of where we’ve been more broadly, and where we’re headed. The story of our economy and our super sector are so deeply intertwined over the last decade or so and will be even more so into the future.
Even though super played such an integral role in helping see Australia through the Global Financial Crisis, the Liberals upon coming to government froze the Super Guarantee.
When that freeze was followed by weaker wages growth, and when Australian GDP growth over the past eight years was the most tepid since the 1930s, driven in part by weak investment, the Liberals have still spent much of their time in office attacking super.
Last year, during our first recession in 30 years, they came after super with an early access scheme that bled $36 billion from super balances. And they had a good, long look at another freeze to the SG as well. My point is that at every juncture, the answer to every question, every challenge presented to this government in the economy, has been to blame and attack and diminish super.
This is partly out of envy at Labor’s creation, partly because it’s a partnership model bringing workers, unions and business together, but mostly out of blind, ideological recklessness. What makes this especially dangerous is that we need to get everything right if we are to avoid the future painted by the Treasury’s Intergenerational Report – which forecasts an economy smaller, slower, older, more stagnant over the next forty years than the last forty.
The Next Election is a Referendum on Super So that’s the context. I want to pay tribute to all of you, Scott Connolly and the ACTU, funds and peak groups – everyone who has mostly held these attacks at bay. Securing the legislated increases to the super guarantee this year was a fight we shouldn’t have had to have, but a win worth celebrating. We have won more battles than we’ve lost. And occasionally, even, a policy win – like the legislation introduced last week to remove the $450 minimum threshold for the super guarantee, which we have long supported and took to the last election as policy.
We thank you for championing this policy to protect and support those who would likely suffer the most from the falling living standards that have become a consequence of this Government’s failings – especially when it comes to low-paid working women. But you and I know, we’ve been around long enough to understand, that any victory is just another stay of execution. There’s always another attack just around the corner.
That’s why this next election is about super. It’s a referendum on whether super should be central, or sidelined. Built up or torn down. Because retirement incomes are never safe from a government in which the extremist anti-super tail wags this lightweight Treasurer. Not safe from the stagnant wages this government has said is a ‘deliberate design feature’ of its economic policies – remembering wage stagnation has a devastating impact on super balances as well.
So if the Coalition is re-elected: there’ll be more attacks on super; more attacks on wages; more attacks on Medicare; more attacks on living standards; and more attacks on the working families of middle Australia. That’s the risk attached to an eight-year-old government asking for another three years.
Super is a Solution, Not the Problem
Any objective observer knows super has been our big advantage; our economy’s saving grace. During the GFC, around 150 Australian businesses were able to secure almost $120 billion in new equity to support their growth – and almost half of that came from the super sector.
Despite the past 8 years of otherwise weak investment, super has remained a vital source of funding for our businesses and projects. In June this year, 13 per cent of APRA-regulated superannuation funds was allocated to property and infrastructure investments. That is more than $280 billion to support our fast-growing cities, suburbs and regions.
During COVID, super funds provided billions of dollars in recapitalisation and critical business credit and loans to Australian companies and private businesses, helping to absorb the economic shocks. This put downward pressure on the cost of capital for businesses, sandbagged the national economy, saving local jobs, and generated value for fund members.
Over the 12 months to June 2021, there was almost a 15 per cent increase in total superannuation assets. And in the future, Australian super assets are set to grow from $3.3 trillion today to around $34 trillion by 2060, which means from 157 per cent to 244 per cent of Australian GDP. Anyone who looks at the magnitude of this opportunity and wants to wind it back has got rocks in their head. Why would we undermine this source of business investment, dignity and
spending in retirement, and sustainable long-term growth? In 2020, Australia had the third largest pool of pension assets in the world as a proportion of GDP, ahead of the US and UK – and the fourth or fifth biggest overall.
Over the past 20 years, Australia has experienced the greatest asset growth of any pension market, growing by 11.3 per cent. Critical to this growth has been the compulsory and near-universal nature of the Super Guarantee. It means around a fifth of ASX capitalisation is currently owned by APRAregulated funds. So much more would be possible with a government which sees super at this magnitude as part of the solution to our economic challenges and not
Super and Climate Change
Today I want to talk specifically about the opportunities for super in cleaner and cheaper energy and the clean economy more broadly. We know that you invest for the long-term and that means you have a fundamental role to play here. Your primary duty is to invest in your members’ best financial interests. And their best financial interests are served by investing in business and assets that will still be profitable thirty years from now.
This means you are acutely aware of the material financial risk that climate change poses today, and over the decades to come. The RBA, ASIC and APRA all share your views. We know climate change poses a risk to the entire financial system.
Just last month the RBA warned that international investors are increasingly adjusting their portfolios in response to climate risks and that Australia risks facing increasingly higher costs in relation to emissionsintensive activities. So we have no more time to waste.
It’s pleasing to see super playing a role in climate action, particularly the industry funds. We welcome every investment in renewable projects from super, as a much-needed source of capital. We have super funds to thank for investment in WA’s largest operational windfarm, in Melbourne Airport’s recently completed onsite solar farm, and in Ausgrid’s community battery project.
More Transparency on Targets and Plans
We also know that behind the scenes, super funds have had a strong record of engaging with the companies they invest in to ensure greater transparency and accountability.
You’re making a difference. The Australian Council of Superannuation Investors has played a leading role in highlighting which companies have committed to net zero emissions and have established targets and plans to get them there. This year, the number of net-zero commitments more than tripled and now almost half of the ASX 200 has set emissions-reduction targets. This is being driven because investors, particularly the industry super sector, are demanding it. In April 2020, IFM supported shareholder resolutions that Santos and Woodside, two of Australia’s largest oil and gas producers, set short, medium and long-term targets in line with the Paris Agreement. At the end of last year, Santos announced new emissions targets, to reduce their emissions by 26-30 per cent by 2030, and to net-zero by 2040.
But despite your best efforts, we know that there’s only so much that you can do in relation to climate risk disclosure when the existing reporting framework is insufficient, inconsistent and inadequate. We agree that regulators and government should provide clearer guidance on this and what companies should be reporting – and we’ll have more to say about it. Like the RBA, we’d like to see disclosures that are usable, credible and comparable, so that there is a baseline, all around the world, that we can measure against. This will help investors make informed decisions.
Last night, the RBA’s Guy Debelle, who has been leading a lot of this work, explained that the Task Force of Climate Related Financial Disclosures (TCFDs) has got a much more detailed, usable, updated guide to disclosure that is going to be the released as part of COP26. This is likely to emerge as the standard that most countries and companies start adopting – and that’s a good thing.
Policy Uncertainty is a Handbrake on Investment
But a lack of consistent and transparent information is only part of the story. Eight years of Coalition policy uncertainty has been a handbrake on super investment in cleaner and cheaper energy. Funds cannot invest with confidence when a government cycles through 22 different plans in 8 years – the last one little more than a pamphlet. Policy uncertainty pushes up the price of finance. That pushes up the price of new projects and technology. It slows the transition. It also means super funds are increasingly needing to look offshore. So we desperately need policy stability, and clear and ambitious targets, which create certainty for super investments to follow.
Economic modelling for IGCC has shown that Australia would create $63 billion in fresh investment opportunities over the next five years by strengthening climate targets and policies in line with reaching net zero emissions by mid-century. And stronger 2030 policies can unlock $131 billion investment in clean industries and new jobs by the end of the decade.
The biggest impediment to tens of billions of dollars of investment in cleaner and cheaper energy is a Prime Minister who can’t get his head around the opportunities here and whose heart isn’t in it. So many missed opportunities to create real jobs, and real investment, in regional communities and economies. Action and leadership that we know won’t cost jobs but will create them. We know the market is there for renewable energy investments in Australia because it has been growing all around the world. And yet, we’ve been bucking the global trend. Australia is losing another race it should be winning.
S&P Global analysis indicates a passive investment in the ASX200 exposes investors to around twice the carbon exposure per dollar invested than in other major markets. Large investment funds report that if they invest in Australia at all, they
spend around 2-3 times as much capital in projects in the EU, USA and Asia than they do on Australian projects.
But these are the numbers that really stood out for me:
A recent survey of Australian investors managing $1.3 trillion found that 70 per cent of them highlighted policy uncertainty as a key barrier to investment, up from 40 per cent last year. This month, HESTA CEO Debby Blakely said, ‘while we want to invest more here, for every $1 we have invested in Australian renewables, we have $3 committed to equivalent assets overseas. The assets are in countries that provide stable, predictable policy settings, which have
given us the confidence to make long-term investments’.
The BCA also identified “policy certainty” as a key factor currently missing in Australia’s energy investment landscape.
This is a devastating vote of no confidence in Scott Morrison and Josh Frydenberg and the wasted decade of missed opportunities the Coalition has presided over.
Super Can Be Central
I know you all understand this. You know that more investment in cleaner and cheaper energy means more opportunities for more people in more parts of Australia. We need a government that understands this too. That won’t be a fourth term Coalition government led by Scott Morrison and Barnaby Joyce. A first term Albanese government would understand and unlock these opportunities.
We know super belongs at the very centre of the recovery. And that this is a key part to ensuring our economy is stronger and our energy cheaper and cleaner after COVID than it was before.