Combet describes himself as “passionate” about the economy’s transformation. But he says he wants to test some of his ideas and talk to relevant stakeholders before offering views on how best to approach these complicated shifts. As energy and infrastructure companies point out, for example, local community antagonism to the urgent rollout of fundamentals like transmission and distribution networks is only getting more difficult to manage. Inflation and rising interest rates compounded by supply chain and skilled labour shortages translate into rising prices and greater uncertainty for investors.
The politics of super, despite the increasing power of the industry funds, remains firmly anchored in Australia.
Combet notes that industry funds and IFM are already significant investors in the domestic economy, including transmission and distribution networks, and have a “keen interest” in the energy transition.
“There are a lot of moving parts but there’s not a shortage of capital, and a lot of interest from overseas capital as well in the energy transition in Australia,” Combet says. “One of the tasks in the new role is to think about how to effectively and co-ordinate that opportunity for private capital to participate.”
He’s still confident Australia is up to the challenge – in part because he has had a front row seat to the significance of the extraordinary growth of Australia’s superannuation industry from its modest beginnings.
That includes the establishment of IFM 25 years ago to become a funds management and infrastructure business with global reach, one that has been particularly active and successful in private markets. The business was worth over $1.6 billion last December and has over 600 investors worldwide.
The combined savings in Australia’s superannuation pot also now add up to $3.5 trillion, with $1.2 trillion of it managed by industry super funds. The achievement means the funds too have increasingly outgrown the Australian market – an imbalance which can only increase.
International focus
“We obviously look for as many opportunities within Australia as we can, but the nature of the system now dictates that we are international organisations with an international focus,” Combet says.
In terms of the energy transition, that includes looking even harder at the US due to the sheer size of the tax breaks and incentives for renewable energy, thanks to the Biden administration’s Inflation Reduction Act.
But the politics of super, despite the increasing power of the industry funds, remains firmly anchored in Australia.
According to Combet, the record shows funds have exercised their now considerable influence on Australia’s public companies – and well as in the private markets – in a responsible way.
“They’ve been important leaders on questions of sustainability and corporate conduct, and that’s a good thing,” he says. “But most of all they’ve got a long-term focus and a long- term commitment. They are not there to quickly flip assets and seek short-term returns.”
The world economic environment is still becoming trickier to navigate. The onus on funds to generate the best financial returns for members also means they can’t sacrifice that in order to contribute more to whatever is defined as the national interest.
Housing supply
And little is more politically sensitive in terms of national priorities right now than the potential for super funds to do more to address the inadequate supply of housing.
Combet dismisses as “silly” the furore about Treasurer Jim Chalmers’ argument super funds should play a greater role in areas like social and affordable housing.
“If you’re seeking private capital in the form of superannuation capital, obviously we’ve got a statutory responsibility to deliver an appropriate return and, of course, the treasurer understands that,” he says. “Since he raised that issue, there’s been – and continues to be – really good, constructive detailed focus by the funds on how that might be achieved.
“I’m optimistic that will deliver results.”
But he acknowledges that fund investment at scale will require significant government support – whether tax concessions, guarantees or some form of co-investment.
So far there’s little practical evidence of this in Canberra beyond minor tax concessions for build-to-rent investments and plans to set up a new housing affordability fund. Even if this passes the Senate, the impact will be modest. A target of 30,000 homes over five years will barely be noticeable.
Australia’s economic and energy transformation must move a lot further, faster. “Orderly” may be too much to hope for.