The Financial Services Council (FSC)/PricewaterhouseCoopers CEO survey has revealed that Australia has its work cut out for it before it can meet the challenges of an ageing population and become a financial services hub.
The survey garnered the views Australia’s top financial services chief executives, including those of the top 10 wealth managers. It revealed that only 44 per cent were confident with Australia’s approach to addressing the challenges of an ageing population; 95 per cent were not confident that Australia’s current approach to infrastructure would meet the country’s future needs; and, while many supported Superstream and an increase in the superannuation guarantee to 12 per cent, 78 per cent were not confident that the MySuper recommendations would improve Australia’s retirement outcomes.
Referring to national savings, PricewaterhouseCoopers’ wealth management leader Andrew Wilson noted that by 2050 one in five Australians would be over 65 and would begin drawing down on their retirement savings.
“This may have far-reaching implications on the economy as the amount of money flowing out of super funds begins to exceed the amount of money flowing into them.
“This ‘de-accumulation’ may significantly impact equity markets and economic growth as investors move from higher risk, longer-term investments to more conservative ones,” he said, adding that Australia’s savings pool helped support companies recapitalise during the global financial crisis.
FSC chief executive, John Brogden said the problems of an ageing population were compounded by a critical shortfall in retirement savings of $695 billion.
Respondents to the survey acknowledged the industry’s responsibility in meeting these challenges. They identified strategies to achieve this as: improving consumer engagement with superannuation, expanding service and product offerings to cater for an ageing population, and broadening the availability and breadth of advice.
Respondents also identified the key barriers to infrastructure investment as being the focus on short-term performance, daily unit pricing, the scale and complexity of infrastructure transactions, lack of confidence, costs for retail investors and the political system.
“It is clear that if Australia continues with its current approach to funding we will fall well short of meeting our infrastructure needs both now and into the future,” said Brogden.
Wilson said securing channels of funding from super funds was about providing the industry with confidence that infrastructure would deliver a reasonable return commensurate with an acceptable level of risk.
Survey respondents felt that Australia should be positioned as a regional financial services hub, however many were concerned that Australia’s wealth management footprint in Asia was relatively immature compared with other nations. They were optimistic about the introduction of the Asia Region Funds Passport and changes to the withholding tax rule, but asserted that faster action on the Johnson Report recommendations needed to be taken.
