Australian superannuation funds should supply debt financing directly to the Australian non-financial corporate sector, according to presenters at the Association of Superannuation Funds of Australia's (ASFA) Investment Interchange.
ASFA has partnered with the Australian Securitisation Forum and Treasury Association to discuss superannuation's role in Australia's fixed interest markets, particularly how super funds can help develop Australia's corporate bond market.
Executive director, markets group, from the Federal Treasury Jim Murphy said developing Australia's corporate bond market would provide alternative funding for smaller corporations, rather than relying on bank funding and overseas funding.
"The development of a corporate bond market would principally fund medium sized Australian companies. It is much more difficult for smaller companies to go offshore to raise capital. A vibrant debt market would provide that facility," he said.
Former treasury secretary Ken Henry said focusing on growth strategies during the accumulation phase and conservative strategies during the decumulation phase exposes members to sequencing risk, and isn't always necessarily the best strategy.
Murphy said the Government was listing Commonwealth Government Securities to provide a platform for debt financing as well as simplifying disclosure and liabilities for those issuing debt.
"The bottom line is that a debt market would be a very useful diversification for Australia's financial system," he said.
Murphy said the superannuation system – which is almost 100 per cent of gross domestic product – has a social and economic role to play in avoiding another global financial crisis.
Industry representatives discussed the issues at the Investment Interchange, a joint initiative between ASFA and the Australian Securitisation Forum and Treasury Association.
The project is designed to identify and make recommendations regarding policy and market factors that inhibit the allocation of superannuation and broader market investments to the domestic fixed income asset class.
ASFA said the project was necessary, as 4.5 million baby boomers get set to retire – increasing the demand for less volatile investment returns and because the superannuation pool is expected to play a broader role in society.
