Be wary of politicians wanting to use super, no matter their political colour

It’s forgotten now but was rather big at the time: in the last week of the election campaign, a desperate Scott Morrison proposed to allow people to raid their super to buy their first home, to the delight of anti-superannuation warriors like Tim Wilson and Jason Falinski and a few political journalists who spent the entire campaign poised to declare Morrison had turned things around and was primed for another miracle win.

The rest is history — history that makes unpleasant reading for Wilson and Falinski, and for other enemies of superannuation, like Jane Hume and Andrew Bragg, who were able to survive the election catastrophe from the safety of their Senate seats.

Treasurer Jim Chalmers — in that near-unique Australian Financial Review event that actually generated interesting discussion — is now declaring that the super wars are over and that (hat tip to Chalmers for the Attlee reference) it is time to win the peace.

Rest assured the super wars are not over by any stretch for the Braggs and Humes of the world, nor for the ideologues of The Australian Financial Review. Those dead-enders will still be being pulled from bunkers decades hence screaming about evil union-controlled funds.

As it turns out, Chalmers’ idea of winning the peace has something in common with Morrison. “We see trillions of dollars in workers’ capital, we see government budgets heaving with debt, and there are obvious needs for investment, particularly in areas like housing and energy.”

Paul Keating expressed a similar view, noting — as always more pithily than any current politician — “this is a society that can’t house its own children”. He warns that super funds exporting capital to other countries while we need it here may affect the “social licence” of funds.

Chalmers also floated aged care as a possible area of super investment.

All of this feeds into the ongoing debate about a legislated purpose for super and the extent to which super should be strictly a vehicle for maximising the retirement savings of workers, or for some broader economic and social purpose.

The two aren’t mutually exclusive — industry funds have been major contributors to nation-building via infrastructure ownership. One of the absurder moments of the Coalition’s long war on industry super occurred in 2016 when IFM purchased NSW’s power distribution company after Hong Kong and Chinese bids were blocked by then treasurer Scott Morrison — the “unholy”, “union-run funds” saved the bacon and spared the blushes of both Mike Baird and Morrison.

Back then Morrison and his co-treasurer Josh Frydenberg both called for more super investment in infrastructure — although the Coalition used the fact that industry super was far more likely to invest in infrastructure than retail funds to falsely suggest industry funds were too slow to let Australians raid their super during the pandemic.

But the same scepticism that rightly greeted the Coalition’s attempts to repurpose super should apply to Labor, even if Labor actually believes in the existing super system and supports the role of industry funds. And there’s a tension between the objectives of superannuation as a vehicle for retirement savings and as a vehicle for accomplishing policy objectives that the political process has failed to address.

Aged care and housing are both political failures in complex policy areas, and both are the result of a combination of free market operation and government intervention that has resulted in harm for Australians. The solutions should be politically generated, not come from repurposing super.

If superannuation investment in affordable housing supply lacks the obvious problem of Morrison’s hare-brained idea — that it simply would have increased prices, to the benefit of homeowners — it can’t address the ongoing problem of subsidising investors to compete with first-home buyers via negative gearing, and it can’t address the ongoing problem of state governments failing to invest in social housing and developers restricting land supply.

The aged care sector — where a large number of operators are only just clinging to financial life — is far more the result of persistent government underinvestment and a failure of workforce planning at the federal level. When Chalmers refers to “what, if any” role super could play, the emphasis should be on the last part of the question.

Both aged care and housing are also likely to see a new generation of ticket clippers and worthless intermediaries crop up to try to catch some of the vast sums of money that interaction with super funds will send flying around.

As the record shows, our trillions in super funds, and especially those controlled by industry super funds, have been deployed into Australian infrastructure — a mutually beneficial intersection of economic policy and retirement incomes policy. But using super as a kind of bandaid solution to policy problems created by politicians unwilling to pursue the public interest risks undermining the founding purpose of super. And that really will create a social licence problem for a system based on compulsion.