Australia’s Treasurer says $2.3tn pensions pool should fund ‘nation-building’

Australia’s plan to channel its vast pool of pension savings towards “nation-building” investments in clean energy and social care need not come at the expense of returns, Treasurer Jim Chalmers has insisted in an interview with the Financial Times.

As part of his own vision for “values-based capitalism”, Chalmers is seeking to reform Australia’s A$3.3tn (US$$2.3tn) superannuation sector, the country’s system of compulsory pension savings, which has long been a political battleground.

Chalmers, who became Treasurer last May, wants to ringfence superannuation assets from early withdrawals, such as for housing payments and pandemic relief, in order to protect retirement saving and mobilise capital for long-term investment in Australia’s economy.

But political opponents and some superannuation funds fear the money will be wasted on government pet projects at the expense of investment returns.

“It needn’t be a controversial point. I’m not for one second saying that we should compromise returns,” said Chalmers.

“It is a thoroughly mistaken caricature of my position to say that I think we should trade off between returns . . . and investment in clean energy. I think it’s possible to invest in clean energy and get the kind of returns that people need and deserve.”

Chalmers has not set out specific proposals for how such “co-investment” in social projects might work in practice.

This week, he proposed to define in law the purpose of superannuation for the first time, as being to “preserve savings and deliver income for a dignified retirement”. Chalmers argued this would limit attempts to let people raid their savings early.

“I think superannuation should be for people’s retirement,” he said. “Once you agree that, then some of the ideological frolics that our opponents have engaged in on ‘super’ become out of bounds. And I think that would be a good thing.”

The previous government, led by Scott Morrison, proposed to let first-time housebuyers tap their retirement savings for deposits. More than A$30bn leaked out of the system when people were allowed to access their savings during the Covid-19 pandemic, the Treasurer said.

Australia’s debate mirrors similar arguments in the UK and elsewhere. Britain’s Conservative government is also seeking to channel pension savings into national investment.

“A massive pool of pension savings is one of the big things we’ve got going for us,” said Chalmers, adding that it was vital to apply that advantage to benefit Australia’s economy.

Chalmers last month set out his plans to reform capitalism in a 6,000-word essay that cited Greek philosopher Heraclitus and attacked what he called “a negative form of supply-side economics”.

However, he has not proposed large changes to tax or spending, concentrating instead on reforms to the taxation of multinational companies.

The Treasurer’s criticism of “neoliberalism” has been pilloried in the Australian press and by former Treasurer Peter Costello, who said funds and businesses forced to back a social agenda would lose focus on delivering returns.

Chalmers said he was surprised at the response to his essay, which he described as not “remotely radical”. 

“There will always be the kind of last defenders of Thatcherism who have done very well for 40 years pretending that the solutions of the 1980s can be photocopied and applied to the new challenges of the 2020s,” he said.

Prime Minister Anthony Albanese’s centre-left Labor government is cautiously seeking to advance its policy agenda with a slender majority in the lower house.