Superannuation funds face a long journey to win back community trust after controversies this year, including those coming out of the Hayne royal commission, former NSW premier Mike Baird said, but telling the story of their enormous contribution to infrastructure developments is a good place to start.
Baird, now the chief customer officer of consumer banking with NAB, told delegates at the Association of Superannuation Funds of Australia’s 2018 ASFA Conference in Adelaide that super funds were playing an enormous role in helping governments meet the challenges of budget constraints, ageing populations and infrastructure needs.
In a speech and then fireside chat with ASFA chief executive Martin Fahy, Baird also called for funds to be “very purposeful” about looking for opportunities to collaborate with banks in lending to businesses.
Stories of nation-building with the help of capital from superannuation funds needed to be told, Baird said.
With the help of an asset recycling scheme that was particularly successful in NSW, the state was able to reduce net debt and free up almost $50 billion in capacity to put into new infrastructure.
This included generators, desalination plants, ports, cultural assets, sporting assets, schools and hospitals.
The NSW Metro and WestConnex projects, for example, would vastly increase transport capacity and cut down commuting times, giving workers more time with their families, Baird said.
“The funds have helped to build, for Sydney and NSW, the future for the next generation,” Baird said. “For anyone who goes into the new Westmead Hospital with a sick child or a challenging illness…the difference that makes to those families at those moments are connected back to the funds that played a role in this.
“I think telling that story in a way that is compelling and genuine gives a broad context. [Part of how] you bring trust back into industries is knowing that part of what we are doing is building a future that is better for you.”
He said banks could work “side by side with funds” to make business lending work for all parties. If Australian funds gave debt allocations comparable to those available in countries such as Japan, the US or the UK, more than $200 billion in funding could be made available for business lending, along with low-volatility investment instruments for ageing populations.
“My argument and request to the industry would be to be very purposeful about this, look for opportunities,” Baird said. “If you look at the small-business market, how we can work together to bring pools of assets that, from a diversified point of view, provide a great opportunity but as a collection give scale. I think that’s something where we could strongly work together.
“From a bank point of view, the capital requirements are constrained towards 3-5 years, funds are looking for longer term. Funds aren’t looking for the transactional banking or the derivative business or the debt capital market business. So it’s actually a match made in heaven. And those sorts of partnerships, we’re certainly working with some funds on some explicit portfolios and assets.”
When Fahy asked Baird what he felt when watching the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, he said it had brought a “sheer determination” to the financial services industry to do better.
“We’re aware that things go wrong but the graphic stories and examples, they can’t help but have an impact,” Baird said. “From my point of view, that brings a sheer determination that we have to do better, we will do better, and if we embrace the culture and the thinking and the leadership that I think is required [following] those revelations and [determine] how we go on a journey to win back that trust, I think we will be much, much stronger as a collective.”